Armed Forces: European Rapid Reaction Force
	 — 
	Question

Baroness Knight of Collingtree: To ask Her Majesty's Government how many British troops are currently serving with the European Rapid Reaction Force.

Baroness Taylor of Bolton: My Lords, I am sure that the whole House will join me in offering condolences to the friends and family of Corporal Daniel Nield, who was killed on operations in Afghanistan last Friday.
	Turning to the Question, the Answer is none, because there is no European rapid reaction force.

Baroness Knight of Collingtree: My Lords, does the Minister recall that, as recorded in col. 1353 of Hansard of 27 October last, she assured me that the rapid reaction force did not exist? Is she aware that two days later, in the Royal Gallery, there was a large reception for our Armed Forces, during the course of which five soldiers present told me that they were currently assigned to and working with the rapid reaction force? Will the Minister make it clear that this rapid reaction force is not the same rapid reaction force as the one that is said to be part of the European army?

Baroness Taylor of Bolton: My Lords, I can be consistent and give an assurance that there is no European rapid reaction force. Of course we have troops on standby, and at that significant reception in the Royal Gallery we were all able to talk to our soldiers, who have embarked on a variety of missions, some with NATO and some, indeed, with the EU on occasion.
	The simple fact of the matter is that we have only one set of forces. We in Britain decide how to deploy them. There is no permanent standing army waiting for Europe to instruct it, and there is no European rapid reaction force.

Lord Rotherwick: My Lords, today Reuters reports in the newspaper that a battalion of French and German soldiers is to be deployed in Strasbourg. Indeed, it is the first time that German troops have been deployed in Strasbourg. Who deploys this force? Do the German Government or the French Government deploy it, or is it a European force?

Baroness Taylor of Bolton: My Lords, the same procedure applies as I have just outlined for this country; namely, that we have control over our own forces and control over their deployment, be that on NATO operations or, indeed, EU operations. The same applies to other countries. Each country decides how and when its own forces are deployed.

Lord Stoddart of Swindon: My Lords, the French are very keen on forming a rapid reaction force and have been for some while. Can the Government give an assurance that they will never agree to such a force?

Baroness Taylor of Bolton: My Lords, I think that the noble Lord is under a misapprehension. President Sarkozy has made it extremely clear that there is no suggestion of having a European army. Indeed, he has said of his own situation that,
	"our armed forces are and will remain national. They won't be integrated into any supranational ... forces".

Lord Addington: My Lords, I associate these Benches with the condolences given earlier. Will the noble Baroness enlighten the House as regards the situations in which we would consider taking action with our European allies; for example, in relation to peacekeeping?

Baroness Taylor of Bolton: My Lords, we have spoken in this House on previous occasions on the use that we are now making of our forces in conjunction with our European allies; for example, in the work that is going on to deter piracy off the Horn of Africa. NATO was doing that work until December and a European force is now doing it for a year. That is a good example not only of European co-operation but of co-operation between NATO and the EU.

Lord Ashdown of Norton-sub-Hamdon: My Lords, the United States has in effect withdrawn its security guarantee. Under President Obama the United States will have different priorities in the world; in the future Europe will not be its major priority. We are facing an assertive Russia, a rising China and a shift of economic power to the east. In the face of these circumstances, is not the right reaction from Europe to deepen its institutions of defence and foreign affairs and, if there is no European reaction force, should there not be one soon?

Baroness Taylor of Bolton: My Lords, President Obama's priorities may have a different emphasis but I suspect that the basic thrust of his policy will remain the same given the challenges that we all face, some of which he has outlined. Challenges such as terrorism are ones that Europe and the United States share. It is right that we should work together within Europe. We are a defensive alliance and NATO will remain the centre point of that. In order to make that alliance work I do not think that we need to deepen or reinvent new structures. The example I gave a moment ago of piracy shows that NATO and the EU can work together very closely and very successfully without over-elaborate structures, which I think do not always serve Europe well.

Lord Trimble: My Lords, if the Government are as lukewarm towards a rapid reaction force as the Minister suggests, I wonder what they were saying at the presidency meeting in December which agreed among other things that there should be the goal for 2010 of deploying, or being capable of deploying,
	"two rapid response operations of limited duration using ... the EU's battle groups".

Baroness Taylor of Bolton: My Lords, the EU's battle groups are domestic groups which on occasion come together to deal with a specific policy. We have a battle group which we could use if we so chose, but the choice would be ours; it would not be made under instruction from the EU or anyone else.

Lord Redesdale: My Lords, considering the problems that have arisen in trying to get any concerted action in many African countries that are suffering a collapse of civil administration, would not a European Union coherent response be the right way forward? Without it, is it not possible that we will ignore many problem areas in Africa?

Baroness Taylor of Bolton: My Lords, there have been attempts by European countries to try to ease the situation—for example, in Chad—but I do not think that we should have any illusions that we can solve all the problems of the world by ourselves.

Lord Wallace of Saltaire: My Lords, does the Minister recall that the launch of the European security and defence policy was an initiative of the British Prime Minister Tony Blair, and that we appear rather to have back-pedalled on that in the past three or four years?

Baroness Taylor of Bolton: My Lords, I do not think that there has been any back-pedalling; what I think there has been is a great deal of misrepresentation about what co-operation with Europe is all about. I repeat what I said earlier: there is no European army, there is no permanent standing army, and we in this country will make decisions about how, where and when our Armed Forces are deployed.

Schools: Rights Respecting Schools
	 — 
	Question

Baroness Massey of Darwen: To ask Her Majesty's Government how they are supporting the UNICEF Rights Respecting Schools initiative.

Baroness Morgan of Drefelin: My Lords, the Government are providing funding to UNICEF UK to pilot its Rights Respecting Schools initiative. Funding of just over £500,000 split over three financial years from 2007-08 to 2009-10 is being provided. The programme aims to help to provide children with a practical understanding of the personal meaning of their rights and those of others, by relating the principles of the UNCRC closely to everyday behaviour in the classroom and school.

Baroness Massey of Darwen: My Lords, I thank my noble friend for that very encouraging reply. Will she take note of the recent Good Childhood Inquiry, which emphasises emotional development, and of other reports that do the same thing? Does she agree that the social and emotional aspects of learning in schools should be integrated, expanded and encouraged?

Baroness Morgan of Drefelin: Of course, my Lords. The Government are taking careful note of the report to which my noble friend referred. I agree entirely that the social and emotional aspects of learning are key to a successful curriculum. In fact, as my noble friend is aware, the Government introduced the SEAL programme to primary schools in 2005 and to secondary schools in 2007. SEAL is exactly about developing the concept that she referred to and we know that it has a positive effect on, for example, attendance and behaviour. This is a crucial aspect and many of the schools in the Rights Respecting Schools initiative are working with it.

Baroness Verma: My Lords, the well-being and participation of a child at school are extremely important; discipline, respect and structure are crucial tools for children to be able to grow into responsible adults. Does the Minister accept that in the past 11 years the Government have completely failed to address the increasing numbers of truants, cases of bullying and loss of discipline, which are leaving our children feeling helpless and powerless?

Baroness Morgan of Drefelin: No, my Lords, I certainly do not accept that analysis. In fact, the Children's Society report published this week shows that children today are better educated, better off and much healthier than ever before. However, we are not complacent. We have set out our 10-year Children's Plan, which has some very ambitious aspirations for children. We will make this the best place in the world for children to grow up in.

Baroness Howarth of Breckland: My Lords, despite the considerable progress that has been made, has the Minister looked at how children with special difficulties in health can enjoy their right to education? I give the example of children who have been sexually abused and who find it extremely difficult to exercise their rights or, indeed, to learn, yet it remains difficult to get proper therapeutic provision for those children to ensure that they can enjoy their rights and follow on their education.

Baroness Morgan of Drefelin: My Lords, as the noble Baroness is aware, the Government requested a full review of child and adolescent mental health services. That review was published recently. We have accepted its recommendations and we have set up a national steering group to monitor how we are progressing access to the kind of specialist services that she referred to. The point of the Rights Respecting Schools award is that it is about encouraging children to understand the needs of others, to respect others and to understand their responsibilities. Yes, improvements in behaviour have been displayed and that must help children who have the difficulties that she described.

Baroness Garden of Frognal: My Lords, will the Minister say what feedback has been received from the schools adopting this UNICEF initiative and, following on from the noble Baroness's question, what impact the initiative has had on levels of bullying in schools?

Baroness Morgan of Drefelin: My Lords, we have asked Sussex University to evaluate the impact of Rights Respecting Schools, because this is a very important intervention. Other interventions, programmes and national strategies are in place and it is important to understand what makes the difference. We know that Sussex University is seeing early encouraging signs, such as improvements in the playground, where children have to deal with difficult situations where conflicts and bullying arise. There are very encouraging signs with the development of this programme.

Baroness Howe of Idlicote: My Lords, is the Minister aware that this month's National Governors' Association magazine contains an article in which the chairman of governors at Coombeshead College in Devon says that having student representatives on the governing body has been hugely beneficial? He says that their input on all issues including bullying has brought a unique and wholly positive experience to deliberations. The UNICEF initiative is excellent. Will the Minister encourage the Government to support this initiative in at least all secondary schools?

Baroness Morgan of Drefelin: My Lords, we have, as the noble Baroness knows, placed a duty on schools to listen to the voice of children and we will do all that we can to promote that.

Lord Northbourne: My Lords, given the importance of social and emotional education, does the Minister accept that, for most children, the most important place where that education takes place is in the family? Are the Government taking steps to support those parents who are not experienced in this field to educate their children socially and emotionally?

Baroness Morgan of Drefelin: My Lords, the noble Lord is completely right; it is parents who bring up children, not the Government. We must do our best through the services that we provide. We have a very active programme of supporting parents through helplines and targeted parent intervention programmes. We take that very seriously.

Foreign Policy
	 — 
	Question

Tabled By Lord Renton of Mount Harry
	To ask Her Majesty's Government whether they will alter their foreign policy as a result of the election of the new President of the United States.

Lord Marlesford: My Lords, on behalf of my noble friend Lord Renton of Mount Harry, and with his permission, I beg leave to ask the Question standing in his name on the Order Paper.

Lord Davies of Oldham: My Lords, the foreign policy of the United Kingdom is driven by long-term objectives including countering terrorism and proliferation, preventing conflict, combating climate change and strengthening international organisations. The United States, under presidents of both political parties from Franklin Roosevelt onwards, has long been Britain's most important bilateral partner in pursuing its goals. We look forward to working closely with President Obama to strengthen this special relationship, as he and the Prime Minister agreed on 23 January.

Lord Marlesford: My Lords, I thank the Minister for that Answer. Does he agree that our relationship with the United States, which should be of crucial importance to both countries, must be based on equality of value of the views and advice on foreign policy—something on which we have much to offer—and that we must not again, as we have over much of the past 10 years, waste that relationship by acting as a lapdog to the United States?

Lord Davies of Oldham: My Lords, I refute that analysis of the past decade. Of course the United States and the United Kingdom are close partners, and all intelligent people in the United Kingdom would want that partnership to continue, but it would be quite wrong to suggest that the United Kingdom has not pursued its own policy goals. We made clear to the United States—on, for instance, the issues of Guantanamo Bay, which we wanted closed, extraordinary rendition, and Diego Garcia—our disagreement with the policy of the previous President of the United States.

Lord Anderson of Swansea: My Lords, is it not encouraging and a refreshing change that, in her confirmation statement before the US Senate on 13 January, Hillary Clinton included not only the ongoing wars in Iraq and Afghanistan, weapons of mass destruction and terrorism but also, significantly, climate change, the world-wide fight against poverty and human rights, particularly women's rights? Is this not a significant change and with the spirit of international co-operation that the new Administration have promised? Does it not show that the foreign policy of the new Administration and of this Government now converge?

Lord Davies of Oldham: My Lords, I am grateful to my noble friend for putting a more realistic perspective on future developments. We particularly welcome the movement on climate change. In the past the United States has quite clearly detached itself from a challenge which we all recognise faces the whole world. We greatly welcome the indications from Hillary Clinton that the United States will play a more positive role in that dimension as well as in the other areas that my noble friend mentioned.

Lord Wallace of Saltaire: My Lords, will the Government accept that those of us who have criticised them for following far too closely the Bush Administration foreign policy on a range of issues very much hope that British foreign policy will change now with a new and much more enlightened Administration? Do they also recognise that our illusion of a unique special relationship with the United States is not shared in Washington? The United States clearly has special relationships with Israel, Canada, Mexico, Japan and a great many other countries. From the other end of the telescope, the relationship looks a little different.

Lord Davies of Oldham: My Lords, Washington's perspective on foreign affairs will of course be a little different from London's. The noble Lord has indicated those other relationships to which the United States attaches proper importance, but he will also recognise the special dimension to the relationship between the United Kingdom and the United States, on which we hope to build further. It is entirely possible and compatible for the United States to develop its relationships with other significant actors on the world stage while at the same time looking to Britain to produce a productive partnership with it in crucial areas.

Baroness Symons of Vernham Dean: My Lords, will the Government also continue to press on other, very distinct differences that we have had with the United States on foreign policy? I am thinking in particular about the International Criminal Court, the protocols on chemical and biological warfare, and, of course, policies concerning Cuba. I hope that those will be pressed.

Lord Davies of Oldham: My Lords, my noble friend has accurately identified areas in which British policy has differed from the United States. We think that it is likely that the United States will adopt strategies that are rather closer to the ones that we have recommended and followed in recent years.

Lord Howell of Guildford: My Lords, does the Minister agree that one way of meeting President Obama's obvious wish to make America more of a team player, with less emphasis on going it alone, will be for us here in Britain to work even more closely with our French friends and allies across the Channel and to build on the very close links that we already have on energy, defence procurement and so on? Does he accept that practical Anglo-French co-operation is one of the best ways of carrying Europe forward, and that it will get stronger still under the next Conservative Government?

Lord Davies of Oldham: My Lords, the influence of Kenneth Clarke obviously runs very strong in the Conservative Party, even in the Upper House. I am delighted to see the noble Lord putting forward such a positive agenda for Britain's co-operation with Europe in effecting policies in the world, in which we clearly see a European voice having an important dimension.

Lord Hamilton of Epsom: My Lords, the Minister mentioned Guantanamo Bay. Will the British Government undertake to lean on our European partners to take prisoners from Guantanamo Bay who are their nationals?

Lord Davies of Oldham: My Lords, the noble Lord will know the position of the British Government with regard to our nationals. There has been reluctance among several major European states in that respect. We take the view that each state must take responsibility for its nationals, and we look forward to achieving the objective outlined by the noble Lord.

Lord Avebury: My Lords, has the Minister noted President Obama's offer of special assistance to the Government of Pakistan in combating extremism? Have we made any similar offer, and is there any co-operation between us and the Americans on that matter?

Lord Davies of Oldham: My Lords, we certainly welcome the fact that President Obama is indicating a fresh perspective with regard to Pakistan. Of course we have exactly the same analysis as the United States of the action that needs to be taken, some of which can be taken only by the Pakistan Government, to restrain the training grounds for terrorists. That is an area in which we would expect the Americans to take the lead, because they have a closer relationship with Pakistan on such matters, but we will do our bit.

Israel and Palestine: Detained Parliamentarians
	 — 
	Question

Lord Hylton: To ask Her Majesty's Government whether they will renew their request to the Government of Israel to release all detained Palestinian parliamentarians, with a view to establishing a permanent ceasefire and a single Palestinian negotiating platform.

Lord Davies of Oldham: My Lords, we welcomed Israel's release of two Palestinian Legislative Council Members in June. We continue to call for all elected PLC members detained by Israel to be either released or subject to due legal process. We support current efforts led by Egypt aimed at establishing a permanent ceasefire and encouraging Palestinian national dialogue.

Lord Hylton: My Lords, I thank the noble Lord for his reply. Does he agree that current and former detainees can often be more realistic than some of those presently at liberty? Does he recall that the then Secretary of State for Northern Ireland went to the prisons to talk to convicted offenders around the time of the Belfast agreement? Will Her Majesty's Government recommend to the Government of Israel a similar approach to people who have not even been charged?

Lord Davies of Oldham: My Lords, the parallel between Palestine and Northern Ireland is often drawn; I am not sure that it has total validity. The noble Lord will recognise one crucial difference: the British Government had established a position for the resolution of the Northern Ireland situation before dealing with those in prison, but we cannot see that Israel has established that framework yet. However, the noble Lord is right that those whom states imprison are often the leaders with whom they subsequently negotiate.

Lord Janner of Braunstone: My Lords, does my noble friend agree that the current Egyptian-brokered ceasefire negotiations between Israel and Hamas should be used to resolve all outstanding issues? Surely that must include the immediate release of Corporal Gilad Shalit, who was captured by Hamas in June 2000, before any Hamas parliamentarians were detained? Are Her Majesty's Government pressing for the release of Corporal Shalit?

Lord Davies of Oldham: My Lords, my noble friend, with his knowledge of the Middle East, will know just how significant is the Egyptian role in the ceasefire, which remains fragile and must be the Egyptian Government's priority at present. It would be looked on as a little odd if Britain identified as a major issue the question of the release of the individual whom my noble friend identified. It is not that the matter should not be addressed, but that it is a little premature when there are so many substantial issues that need to be resolved in the present crisis between Israel and Palestine.

Lord Campbell of Alloway: My Lords—

Baroness Northover: My Lords—

Lord Hunt of Kings Heath: My Lords, perhaps we could hear first from the noble Baroness.

Baroness Northover: My Lords, thank you. Does the noble Lord agree that the quartet was warned, not least by distinguished Members of your Lordships' House, about the dangers of dividing the Palestinians one from another? Does he also agree that the time has come to set aside inappropriate preconditions put on Hamas and bring them properly into the peace process?

Lord Davies of Oldham: My Lords, the noble Baroness will recognise that as a result of the developments of the last few weeks, it is quite a considerable challenge that she identifies. I am not sure that she is right to suggest that the quartet was following a mistaken strategy in these terms, but it is certainly the case that the international objectives of a two-state solution of Israel and Palestine can only be achieved when effective negotiations take place, and of course at present, Hamas is the elected authority of the Palestinian people.

Lord Campbell of Alloway: My Lords, is the noble Lord aware of prisoners of war ever having been used as hostages? It is not really in the interests of them and their possible release to discuss openly what any Government should do; it should be left to diplomacy.

Lord Davies of Oldham: My Lords, I think the whole House will appreciate that testimony, coming from where it does, and I am grateful for the point the noble Lord makes.

Lord Dykes: My Lords, will the Minister also look into the question of all the Palestinian detainees held in Israeli prisons—some of them without due process—which amounts to around 9,000 people, some of them being held for many years? That is equivalent, pro rata, almost to double the entire prison population of the United Kingdom.

Lord Davies of Oldham: My Lords, I think the whole House appreciates the range of injustices that revolve around the Israel and Palestinian problem. It is easy to identify the injustice perpetrated by one side and then for some other source to identify a counterposition. At this stage, it is inevitable that the authorities concentrate on the serious issues that need to be resolved. That is why we should give all the support we can to Egypt, not only in having effected the ceasefire and, we hope, having created circumstances in which it can be sustained, but then in beginning to identify the agenda which produces the steps towards peace.

Baroness Symons of Vernham Dean: My Lords, with the leave of the House, may I ask my noble friend if he will reflect on the point he made a moment ago, that Hamas is actually the authority in Gaza and not of the Palestinian people? I do beg the House's pardon.

Lord Davies of Oldham: My Lords, I am grateful to my noble friend. I was struggling for an opportunity, but unfortunately neither of the two questions which were subsequent to my mistake quite gave it to me. I apologise to the House for that slip.

Banking Bill

Bill Main Page
	Bill as Amended in Committee
	Explantory Notes
	Amendment Paper
	3rd Report from Constitution Committee

Report (2nd Day)

Clause 75: Power to change law
	Amendment 54
	 Moved by Lord Howard of Rising
	54: Clause 75, page 39, line 20, leave out subsection (3)

Lord Howard of Rising: My Lords, I will also speak to Amendment 55. Amendment 54 would omit Clause 75(3). This subsection allows Her Majesty's Government to amend any law retrospectively. The Minister has pointed out that this clause can be used only within narrow limits and would not be used to amend the safeguards in the Bill. However, subsection (3) refers to subsection (1), which says "amend the law", so not only banking law but a much broader picture has to be considered. There is nothing narrow about this.
	If there is a severe danger of financial collapse and unforeseen circumstances arise, there is nothing to stop Parliament being recalled and the necessary powers being put in place. That is why there is the power to recall Parliament to cope with unforeseen emergencies. There has been talk about the cost and the difficulties of this, but these are small matters compared with the surrender of democracy that is proposed.
	I wondered when reading Hansard whether the Minister and I were discussing the same clause. The Minister justified the inclusion of retrospective legislation by citing the precedents of the Safeguarding Vulnerable Groups Act 2006 and Section 148 of the Criminal Justice and Immigration Act 2008. The Government's arguments that these are precedents for Clause 75 are baffling. The examples contain nothing of a retrospective nature. The Minister compared retrospective legislation with the effect on a contract of employment if there was a change in taxation. That is no comparison, because the employee would pay the revised tax rate from the date of the introduction of the new tax, not on previous earnings. I do not think that the Minister was proposing that a poor worker should have to pay a tax on the earnings of previous years when that tax did not exist or, to take the reverse side of the argument, be able to claim a retrospective tax rebate.
	When we debated the clause in Committee, more than one noble and very experienced Lord commented that they had not previously seen such legislation as this clause proposes. The Minister has repeatedly emphasised the need for flexibility to deal with unforeseen circumstances and has not yet justified this massive departure from the democratic processes of this country. The Minister gives assurances about how the legislation will and will not be used. As my noble friend Lord Forsyth pointed out, how can the Minister give assurances when he has no idea what the events will be over which he is giving the assurances? I beg to move.

Baroness Hayman: My Lords, I inform the House that if Amendment 54 is agreed, I cannot call Amendment 55 by reason of pre-emption.

Lord Goodlad: My Lords, Amendment 55 stands in my name and the names of the noble and learned Lord, Lord Morris of Aberavon, and my noble and learned friend Lord Lyell of Markyate.
	Your Lordships' Select Committee on the Constitution reported to the House on this Bill on 22 January. I wrote to the Minister that day on behalf of the committee. First, we asked for the Government's view ahead of Report on whether the currently drafted broad and far reaching wording of Clause 75(3) could be limited in terms of the scope of the envisaged retrospective powers. Secondly, the committee expressed the view that it would be helpful if the Government were to provide the House with illustrations of the circumstances in which they envisage that a retrospective power might be used. I fully understand the difficulties that have prohibited the Minister from providing a substantive reply.
	Your Lordships' Select Committee agreed with the assessment of the Delegated Powers and Regulatory Reform Committee that Clause 75, which empowers the Executive by an order laid before Parliament to,
	"disapply or modify the effect of a provision",
	in any Act of Parliament—other than that which will become the Banking Act 2009—delegated legislation or the rule of common law, is an "extremely wide power".
	It was the view of the committee that our constitution does not include an absolute prohibition on Parliament giving the Executive power by order to repeal, disapply or otherwise amend Acts of Parliament, delegated legislation or the common law. However, we believe that constitutional principle requires, first, that any such power should be granted by Parliament only where there is a compelling justification; secondly, that the scope of the power should be limited to the minimum necessary to meet the pressing need of such an exceptional measure; and, thirdly, that any order made should normally be subject to parliamentary control, either by negative or affirmative resolution.
	Your Lordships' committee took the view that there needs to be a compelling reason in the public interest for a departure from the general principle that retrospective legislation is undesirable, that there is a heavy onus on the Government to justify to the House why a retrospective provision of such breadth as that in Clause 75(3) is required in the context of this Bill, and that further consideration should perhaps be given to narrowing the retrospective nature of the Bill. Further, on the basis of the arguments advanced by the Government so far, notably by Ian Pearson, Economic Secretary to the Treasury in another place, we are unpersuaded that this burden has been discharged.
	On 20 January, your Lordships' committee welcomed the Government's indication that they will re-examine the clause to consider whether a more limited and targeted retrospective power could fulfil the public interest. We look forward to the response of the Minister.

Lord Morris of Aberavon: My Lords, as a member of the Constitution Committee, I support the noble Lord, Lord Goodlad. I seek clarification, as does the committee and as he indicated, of the meaning of "desirable". It seems to me, first, to be as open-ended as a word can be. One is never happy to see words like "desirable" in legislation. Secondly, they are very subjective. Thirdly, many things are desirable. We desire all sorts of things which may not be strictly necessary. One is in a wholly different world when one compares what is desirable and what is necessary.
	I echo the words of the noble Lord, Lord Goodlad. Many of us in the committee—and by tradition we lawyers—are nervous of anything that is retrospective. But, of course, this is not a penal clause. Had it been a penal criminal clause, we probably would have much stronger views. I reiterate the words of the noble Lord that the committee was not against retrospection in principle. There may be circumstances where retrospection is necessary. Anyone who has listened to what emanated from Davos will be abundantly clear in his or her own mind that some of the great financial geniuses of the world do not know exactly and confidently where they are going. In those circumstances, there may be a need for a clause to ensure that the Government of the day may be able to bring in powers where they are necessary, because we just do not know what is necessary. But I would need great persuasion to accept the word "desirable" in a statute of this kind.

Lord Barnett: My Lords, I very much agree with all that my noble and learned friend Lord Morris of Aberavon and the noble Lord, Lord Goodlad, have said. Although retrospective legislation can be acceptable, as my noble and learned friend said, we should not take it lightly. I certainly do not like the idea of it. However, I make it quite clear that I have no love for either the financial geniuses or the bankers who have been running banks in recent months and years, so I would not be opposed to imposing legislation that would help us in relation to what has happened with the banks.
	Amendment 55 is much more modest than Amendment 54. I congratulate the noble Lord, Lord Howard of Rising, and his noble friend Lady Noakes on their assiduity on this Bill. They have worked very hard, which is much appreciated. However, the reason why I have not spoken so far in Committee or on Report is that they have gone so far, taking hours and hours, on technical amendments, when there are major issues to consider in relation to what the banks have done. I recognise that this is a large Bill that requires proper consideration, but we have taken all these hours, in Committee and on Report, on detailed legislation, when in practice things have been happening that we should be discussing and debating but have no time to do so.
	Let me mention one or two issues. There is the question of whether the banks are revising their lending habits. There is the question of whether quantitative easing—sometimes called printing money—should be carried out; some clever geniuses are suggesting that it should, as noble Lords will have seen in the press recently. There is the question of whether we should increase or reduce government debt, as the Opposition want. What is the Government's strategy for banks? We are told by the FSA that the banks are repossessing on a vast scale: 1,000 houses a week are being repossessed. These are all major banking issues, which we have no time to debate. We are debating only these technical issues and I regret that we do not have more time to discuss the major issues. Having said that, and not wishing to delay the House any longer, I make it clear that I very much agree with what has been said so far. I look forward to my noble friend's reply.

Lord Lyell of Markyate: My Lords, my name is on the Marshalled List and I strongly support what my noble friend Lord Goodlad and the noble and learned Lord, Lord Morris of Aberavon, said, as well as what my noble friend Lord Howard of Rising said in opening this matter. Clause 75(3) says:
	"An order under subsection (2)(c) may make provision which has retrospective effect in so far as the Treasury consider it necessary or desirable".
	I say yes to the "necessary". However, we have had no explanation of why the words "or desirable" are necessary or what they are intended to add. We have had no examples so far. I am a little surprised at why this retrospective power is thought necessary. I am prepared to go along with the fact that it probably is necessary, so long as it is subject to adequate parliamentary control; that question will be covered in our next group of amendments. To go beyond what is necessary is to go beyond the traditions of either House of Parliament.
	A useful work, Craies on Legislation, ninth edition, has recently been updated in a comprehensive and helpful form by one of the parliamentary counsel, Mr Daniel Greenberg. He sets out pretty well all the examples that one can find of retrospection. They are always, quite rightly, tightly confined. In 1999, the noble Baroness, Lady Hollis of Heigham, rightly said for this Government that,
	"retrospective legislation should be avoided wherever possible".—[Official Report, 13/10/99; col. 502.]
	The very broad terms of the clause are in danger of setting precedents and quite expressly depart from the doctrine of necessity. I very much look forward to hearing what the Minister says in response. The noble Lord, Lord Myners, is in the Chamber and I can think of few people with a better understanding of this. I do not know whether he is answering this debate—I see him modestly shaking his head—but if he does not understand, I do not know who in the Government does. No doubt the Minister who replies will enlighten us.

Lord Blackwell: My Lords, I wonder with some temerity whether, at this late stage of the legislation, the House and the Government might consider some modest constitutional innovation to deal with the conundrum raised by the amendments. The Government's case, as I understand it, is that if, late at night in the last knockings of doing some deal, a provision is found in some law that prevents the deal from being done and is not important in its own right, the parties concerned need to be able to get on and do the deal and put it to bed. I understand that. However, if this were corporate governance and it was too difficult to call up Parliament and the whole board, perhaps provision could be made for this by giving power to a sub-committee to take actions on behalf of the board when things need to done quickly and subsequently ratified.
	We have no such provision in the constitution, but it would not be impossible to make provision in the Bill for the exercise of this power to be subject to scrutiny by some cross-party Standing Committee of this House, the other House or both Houses, or by a group of privy counsellors or some other innovation. This would simply ensure that there was a constitutional check on the exercise of this power where it was unrealistic for Parliament to be recalled. It would then be possible for that group to decide whether the power was being properly used and whether Parliament should be recalled to debate it if necessary. I know that it is unusual to make constitutional innovations in the course of a Bill, but I simply wonder whether this situation might require some creative thinking.

Lord Davies of Oldham: My Lords, I am sorry to disappoint the noble and learned Lord, Lord Lyell, as I am replying to this amendment. He will know that I speak with the inherent wisdom of my noble friend Lord Myners. My noble friend has cast his decisive eye over the way in which we handle these issues, so the noble and learned Lord can rest assured that the Government are bending their best efforts to defend our position and that we appreciate the criticisms of the clause and the strength of the amendments that have been tabled.
	I am very grateful to the noble Lord, Lord Blackwell, for bringing his innovatory dimension to all this. He will know that I can scarcely respond to it off the cuff at the Dispatch Box. I am not sure that it is feasible to follow the line that he suggests, but I am grateful to him for having advanced further the burden of the remarks made by my noble friend Lord Barnett, who, although critical of the clause, asked us to concentrate on its context and the nature of the problems that we are trying to resolve. I am grateful to the noble Lord, Lord Blackwell, for identifying just how the problems could emerge. I am not sure that his solution is just constitutionally innovatory—it is probably quite impossible—but I will take his point on board and consider it seriously.
	On Amendment 54, I congratulate the noble Lord, Lord Howard, on the force of his argument today and last week in Committee. He has been persistent on these issues but he has also been careful about how he has presented his arguments. I am grateful for that. I hope that, in response to this significant challenge from the noble Lord, Lord Howard, the House will, as the debate progresses today and, if necessary, at Third Reading, begin to find that the Government's position and that of the noble Lord are gradually converging and that there is not a vast gulf between us on these issues. I will, nevertheless, identify why I defend the Government's position.
	I begin with a note of caution. The Government believe that this clause is, as a whole, essential. The Constitution Committee, in its report published last week, stated:
	"We accept that there is force in the Government's general explanation of the need for the Treasury to have a power to change the law by order".
	I will come to the remarks of the noble Lord, Lord Goodlad, in a moment, when I consider his amendment. I must also note that the Constitution Committee raised important questions about the exercise of power in the public interest, to which I will turn when I consider the amendments. Distinguished members of that committee have already made their representations today. The Government are grateful for the committee's balanced and serious analysis of this clause, because we all recognise its importance.
	The Delegated Powers and Regulatory Reform Committee made no specific recommendation in relation to Clause 75, but certainly urged that the House should scrutinise it closely,
	"so that it might satisfy itself that the rather unusual context for which Part 1 of this Bill makes provision justifies the extremely wide power taken by the clause".
	The House has certainly scrutinised it carefully. The noble Lord, Lord Goodhart, who takes great responsibility for that committee, will know how intensive our debates on this were in Committee. He will also appreciate the strength of the representations that have been made today. I realise that there are still areas where the Government need to clarify and explain their position, which is what I hope to do during these debates, particularly on this group of amendments and the next. I apologise in advance for the rather lengthy response that I am obliged to make. This being Report, it is my only shot at convincing the House on these important issues. I have a number of important points to make about the amendments.
	Three crucial issues have been raised. First, there is parliamentary procedure. Parliament must be allowed to play its essential role in holding the Executive to account. We have introduced an amendment that strengthens this in respect of Clause 75. We shall come to this when we discuss the next group of amendments. I will not go through that argument in full now, but it will be recognised that the Government appreciate the importance of government accountability. Secondly, the potential to use the power with retrospective effect would be removed by Amendment 54. As the Constitution Committee has noted, retrospective powers are not unprecedented, but the Government must make a watertight case for why they are needed in this case. I will come to those points in a moment. Thirdly, there is the question of clarity around how the power will be used. This is a broad power. Noble Lords, including the noble Lord, Lord Howard, have rightly sought assurances that this will not be a power exercised on the whim of a Government. I will provide reassurance about the seriousness with which any Government would use such a power.
	We studied the issues carefully. We are aware of the strength of opinion in the House. I hope that it will emerge from our debates today and at Third Reading, should that prove necessary, that the power is more tightly worded and will be fully explained. I must make the position clear. The one thing that the Government cannot do is amend Clause 75 to such an extent that the power becomes unusable; to do so would jeopardise the prospects for a successful bank resolution and thus, in the Government's view, would be irresponsible. I come again to the point that we must not forget: we are discussing this power in relation to the context in which it would be deployed and the nature of the problem for which it would be used to resolve. As the noble Lord, Lord Newby, noted in his remarks in Committee:
	"Having read the Treasury memorandum, it is very difficult to see how the operation of the Bill could take place without such a clause".
	That, of course, is the nub of the Government's case. The noble Lord went on to say:
	"Therefore, although we on these Benches have a general aversion to any retrospective powers, without this power and the whole clause, it would be very difficult, if not impossible, to effect the rest of the powers in the Bill".—[Official Report, 20/1/09; col. 1595.]
	I think that Members on all Benches will agree that they may be necessary. That sums up the position that I sought to deploy at some length in Committee; indeed, it does so more accurately and succinctly than I succeeded in doing. I thanked the noble Lord for his contribution on that occasion, and I do so again today. However, I am going to ruin the effect of that succinct analysis by going on at some length, but that is the nature of the obligation of speaking from this Dispatch Box.
	Amendment 54 would remove Clause 75(3), the provision that provides for retrospective effect. The noble Lord, Lord Howard, has spoken with conviction about the need to remove this subsection, while the Constitution Committee noted the power with a great deal of interest. Its report is balanced and recognises the challenges posed by this kind of power. The committee notes that there is no absolute prohibition on retrospective legislation in British constitutional law or practice. It also notes that retrospective powers are unusual but not unprecedented; in presenting the amendment, the noble Lord, Lord Goodlad, also reflected that position.
	My last attempt to try to provide the House with examples of legislation with retrospective elements did not produce quite the convinced response that I would have liked, and noble Lords indicated that I ought to do better. This is a difficult area and none of the examples that I am about to give will be directly comparable, because we are dealing with different pieces of legislation and therefore very different contexts. I insist that context is everything with regard to these powers. However, all the examples demonstrate that such powers can and have been justified in terms of their context and all of them have been agreed in Parliament.
	A recent example is found in the Criminal Evidence (Witness Anonymity) Act 2008, which overturned the effects of a judgment of the House of Lords on the scope to grant witness anonymity orders in criminal proceedings. The Act was given a qualified form of retrospective effect in that it could, in certain circumstances, apply to witnesses who had given evidence before the Act came into force. This was controversial, but the case was successfully made that the powers were justified in the public interest. There are of course differences between the power under that Act and what will be provided under Clause 75 of the Bill. I do not have the slightest doubt that the noble Lord, Lord Howard, will point that out with some force when he comes to speak, but before he gets the chance to do so I should say that I acknowledge the differences. I am giving an example of legislation that has retrospective effect.
	A second example is Sections 3 and 4 of the National Insurance Contributions Act 2006, which contain regulation-making powers enabling retrospective provision to be made. A third example is in Section 431A of the Income and Corporation Taxes Act 1988. The regulation powers in that section enable provisions to have retrospective effect and may amend primary legislation. However, I accept the fact that the noble Lord, Lord Howard, is loath for me to comment on anything to do with taxation in this respect, so the third example is put forward with some diffidence.

Lord Lyell of Markyate: My Lords, I am most grateful to the Minister for giving those three examples, but they are all examples where the retrospective power could properly be said to be necessary. They would not need the words "or desirable" in order to have that power. Can the Minister draw that distinction as to why he needs "desirable" as well?

Lord Davies of Oldham: My Lords, I intend to do that. It is an important point and I will not sit down without addressing myself to it. Perhaps the noble and learned Lord will allow me to come to that point in time as it relates rather more to the other amendments and not to Amendment 54 tabled by the noble Lord, Lord Howard.
	All of these powers are different in their scope and purpose. As I said, there must be a compelling public interest case for these powers and the House must consider each on its merits. Therefore, the question the House faces today is whether the retrospective power in this Bill is justified in the public interest. We have had the scrutiny which the Constitution Committee suggested was necessary for these issues. In fact, the scrutiny has probably exceeded even the exceptional standards the House normally presents on issues such as this.
	I believe that the public interest case, with respect to Clause 75, is clear. The absence of retrospective powers could jeopardise the chances of a successful bank resolution, undermining the special resolution objectives which are at the heart of this part of the Bill, including the protection of financial stability, depositors and public funds. The Bill has been produced against a background of considerable difficulty—indeed crisis—within the financial system, with great effects on the wider economy and deleterious effects on our people. Therefore, we should recognise that we are operating within a context where quite significant action needs to be taken.
	If I had not anticipated this when the noble Lord, Lord Goodlad, supported by my noble and learned friend Lord Morris and the noble and learned Lord, Lord Lyell, spoke, I knew that the Constitution Committee would present its position in a critical way with a heavy onus resting on the Government to justify to the House why a retrospective power of such breadth as that which is contained within Clause 75(3) is required. The committee asked the Government to consider whether the scope of the power could be narrowed and to give examples of where the retrospective aspect of the power might be used. I will start by trying to deal with the issue of examples, but I preface my remarks by the obvious point that we are talking about events that will happen rapidly and in relation to which it is not easy for us to give clear identification of what might happen. It is no use quoting from the past. We are trying to anticipate with this legislation the kind of crisis which could occur in the future and to ensure that there are powers in place for the authorities to be able to cope.
	The drafting of a transfer order in a fast-burn situation with events moving rapidly may not be perfect. Errors and inaccuracies may creep in. Whether it is appropriate to correct these retrospectively will depend wholly on the facts of the case. If it were the case that the order could not be drafted and action taken rapidly, the very purpose of what the clause seeks to address, in terms of the challenges of a failing bank, could not be achieved.
	As I said, it is difficult for me to give instances. However, there may be cases where the parties all intended to achieve a particular effect and have proceeded on the basis of that intention, but looking at the instrument may reveal that the text itself is ambiguous or even wrong. In such cases it may be entirely appropriate to correct the drafting with retrospective effect to ensure that the parties who have signed up to the resolution are indeed in the position that they intended to be in when they gave their agreement. Alternatively, there may be provisions of the law that it would be perfectly proper and sensible to modify, but which are overlooked when the transfer takes place because of the speed at which intervention is required and because of the complexity of the field.
	I shall illustrate how difficult that could be with regard to the provisions that relate to the control of undertakings. There are numerous provisions regarding significant changes to the ownership of companies, including provisions that require the prior consent of the regulator to a change in ownership. A share transfer instrument or order is likely to trigger those provisions. The Government would expect to comply with them in full; that would, of course, be their intention. It is not impossible, however, that in a rapid fast-burn resolution of a bank with a novel structure or one that carries on an unusual range of activities, we might inadvertently overlook such a provision. If we did not have the retrospective power, the directors of the bank, or indeed third parties, could be faced with the prospect that action taken to effect the resolution might lead to them facing a regulatory penalty. Indeed, in some circumstances it could even result in criminal penalties. Some of these regimes could result in contracts not being enforceable or the transfer not being recognised. All this could lead to serious uncertainty about the consequences of the resolution for the parties involved. As we have debated previously, any uncertainty in entering into these developments could seriously jeopardise the prospect of the resolution being successful.
	I shall give the House another example. There are provisions of regulatory law that apply in different ways depending on the group structure of the regulated entity. Some regulatory law will aggregate the activities of undertakings in the same group. Were the Treasury to take a bank into temporary public ownership as things stand, the bank would find itself in the same "group"—I use that in inverted commas—as Northern Rock, Bradford & Bingley and RBS. We may find that various provisions of regulatory law apply to it in a different way.
	We are aware of those issues and aim to comply with them in full or, where appropriate, to seek a waiver from the regulator. However, it is possible that a particular bank might raise different issues that had never been dealt with before and we might miss something. Again, there is a risk of regulatory penalty and unenforceable contracts. Contracts entered into by the bank after temporary public ownership could potentially be laid open to challenge as a result of the breach that had occurred. There is a risk that that could threaten the resolution, and the Treasury's judgment, based on ongoing contingency planning, is that that risk is a serious one.
	I appreciate that retrospective provision was not used in the resolution of Northern Rock, Bradford & Bingley or the Icelandic banks, but experience shows that there is a clear public interest in being able to respond swiftly to fast-moving events to achieve the special resolution objectives, including protecting depositors and maintaining financial stability, two of the significant objectives of the Bill that establish the context in which these powers are being sought. Indeed, the authorities need to intervene at even shorter notice than in previous resolutions. The difficulties relating to Northern Rock were very well known but a bank failure can occur out of the blue—for example, where an unforeseeable event destabilises the bank. That might occur where trading losses have been concealed by deception and we would not have the warning—limited though it was—that the bank was in trouble in the way that we had with regard to Northern Rock.
	Of course the Government do not take that power lightly but the public interest argument for effective resolution of banks is compelling. That would be jeopardised without the retrospective power. I hope that the examples clarify for the House how retrospection might work in practice and that I shed some light on some of the possible consequences if the authorities did not have recourse to that power.
	The noble Lord, Lord Howard—I am all too conscious of the fact that he has the last word on the amendment—might point out that the examples I provided relate to the needs of the authorities to return to issues that they have not been able to resolve successfully at the first attempt. That may be so, but I would point out that the affairs of a large modern bank can be extraordinarily complex. We have to accept that there is a real chance that the authorities may not be able to resolve the problems immediately and perfectly at the first time of asking. If that means only up to the possibility of making a mistake, the Government are obliged to do so, but I believe that it is better to do that now and prepare for the possibility in the legislation than to proceed on the assumption that the Government on every occasion will get it right first time.
	I hope therefore that the noble Lord will accept that the Government are prepared to own up to the possibility of fallibility, particularly when dealing at short notice with the affairs of multimillion-pound large and complex financial institutions. I hope that he will also accept that the prudent course of action is to make provision that will enable the Government to confront that reality and to act to resolve it if it proved in exceptional cases to be necessary.
	If the noble Lord can accept the case that I have put in the face of his spirited articulation of the principles of parliamentary scrutiny to which he has subjected the clause, I hope that he can withdraw his amendments and give us the basis for further discussions between us before Third Reading on outstanding points of detail.
	I turn to Amendment No. 55, which is in the name of the noble Lord, Lord Goodlad, and which has attracted the support of the other distinguished members of the Committee: the noble and learned Lord, Lord Lyell, and my noble and learned friend Lord Morris. We have considered this proposal to remove the power to make retrospective provision if it is desirable; allowing only that the provision may be made if necessary, which is the burden of the noble Lord's case. I remind the House that anything done under this power will be in pursuit of the special resolution objectives. In this sense, any use of the power will always be necessary: after all, we are dealing with a crisis situation and crisis provisions operating in a short space of time represented by the special resolution procedure, which is the whole substance of that part of the Bill.
	However, if the power were limited to what is necessary, it would suggest that a retrospective provision could be made only where it would be impossible to effect a resolution otherwise than by making retrospective changes. The examples I have given of when the retrospective power might be used illustrate why the need to change the law, including retrospectively, may involve the evaluation of competing public interests. Such an evaluation may show that the case for retrospective provision is justified in the public interest. If such provision could be made only where necessary, that would prevent the better outcome for the public interest being pursued, yet that should be the guiding principle of a Government in action in this context.
	It would also give litigants seeking to undermine the resolution a basis to make points on whether something was necessary as opposed to desirable. Parliament is the principal forum for debating the appropriateness of retrospective provision, not the courts in legal action brought by those who have self interest, not the public interest, as their motivation. I hope that the explanation of the wording satisfies the noble Lord, Lord Goodlad, sufficiently for him not to move his amendment.

Viscount Bledisloe: My Lords, is the Minister not rather overlooking the point that subsection (3) says:
	"may make provision which has retrospective effect in so far as the Treasury consider it necessary".
	In the circumstances that he has just outlined, the Treasury would consider it necessary. Somebody else might only think that it was desirable, but if the Treasury considers it necessary and bona fide so considers it, the Minister has his point. I do not see that he needs "desirable" at all.

Lord Davies of Oldham: My Lords, we are concerned about the possibility of litigation that might occur subsequent to the position, jeopardising the public interest, if we do not phrase the clause as we have. I had hoped that I had established just how carefully we must act in the overriding public interest, in circumstances where it would otherwise be possible for a challenge to be mounted if it were not recognised that the rapid drafting of such an order could have a weakness which would have to be dealt with retrospectively.

Lord Morris of Aberavon: My Lords, I am sure that my noble friend appreciates how thin his explanation is for the need for "desirable" to be included in the statute. Can he give us an example of where "necessary" is insufficient, making "desirable" necessary?

Lord Davies of Oldham: My Lords, I have given hypothetical examples because we do not have an illustration of how the procedure works. Where a drafting error has been identified, leading to confusion and uncertainty as to whether the intended result has been achieved, it may be difficult to say that it is "necessary" to amend the instrument retrospectively. It may be possible for the parties to muddle through on the basis of the existing wording, in many cases living with the possibility of litigation on the point.
	However, that is not desirable; it is far better to put the parties in the position that they thought they were in. The amendment would probably prevent us achieving the security for the parties involved so that no one could challenge their position.

Lord Morris of Aberavon: My Lords, as I cannot speak again on this amendment, will the Minister give us one example of where the word "desirable" has been used in previous legislation?

Lord Davies of Oldham: My Lords, I cannot. However, aspects of this legislation and the special resolution powers, and the fact that we are trying to envisage and cover that which for obvious reasons we cannot accurately identify, coupled with the obvious need to act with great speed to achieve the resolution of the problem, give this Bill a unique quality.
	The context of the Bill is also unique. I am not in any way, shape or form disparaging the significance of other pieces of legislation for our fellow citizens on which I have commented. However, they scarcely relate to a Bill that is trying to curb the catastrophe which has fallen on the financial system, and through that, on the wider economy and the whole of the country. Therefore, the Bill has particular salience. The powers will be used only to make the stabilisation powers, which are necessary to achieve the special resolution objectives, more effective. We have clearly set down the parameters under which the powers will be used. They are confined to this particular special resolution activity. The power can be used only in support of those objectives. The Bill further establishes that the power will not be used to amend the Bill itself, or the safeguards in secondary legislation made under the Bill.
	I, of course, accept that the House is straining to accept a wide-ranging power and that noble Lords seek assurances on how it will be used. The Government are therefore considering what guidance may be put into the code of practice on this issue. As the House has already heard, the authorities will be legally obliged to have regard to the code of practice. For the reasons I have set out, I ask noble Lords to withdraw their amendments. The noble and learned Lord, Lord Lyell, cited Craies on Legislation as giving useful, helpful and limited examples of retrospection. The author of Craies is the draftsman of this Bill.

Lord Elystan-Morgan: My Lords, following a most comprehensive reply to all the points that have been raised, may I invite the noble Lord to return to one very crucial matter before he sits down? While I accept that retrospectivity is indeed an evil, I also accept that there are almost unique situations where it might be a necessary evil. Whereas ministerial order legislation can be utterly despotic, there are circumstances which make it exceptional and necessary. However, I return to the point made by the noble and learned Lord, Lord Morris, concerning the adjective "desirable". The fundamental flaw in relation to that is double. On the one hand, it is extremely wide. That, of course, is why it does not appear in legislation. It is fatally flawed because of its almost illimitable width. Secondly, it is fatally flawed because it is either a subjective test or a test that straddles the line between subjectivity and objectivity. "That which is necessary" is clearly an objective test. If one wanted to change a situation to a limited degree, one could add "that which is reasonably necessary".

Lord Williams of Elvel: My Lords, I am sorry to intervene but we are on Report and the rules are clear, brief questions may be put to the Minister before he sits down.

Lord Elystan-Morgan: My Lords, I apologise. This is a matter of the utmost concern. I beg the Minister to consider—I am unfairly hurling a ball at him and expecting him to catch it—whether "reasonably necessary" might not serve all the purposes that he has in mind.

Lord Davies of Oldham: My Lords, I am grateful to the noble Lord for seeking to be constructive but I have illustrated the limited context in which these powers are to be used and why we need to go beyond "necessary" to produce an order which is better for the parties and is in the public interest, but which may not in law be justified solely by the concept of necessity. I do not have a great deal further to add except to make the following obvious point. The Government have indicated that we still have capacity to introduce regulation with regard to the code of practice. We still have Third Reading in which to debate these issues further. Of course, we are clear that strong feelings have been expressed on this matter around the House.
	I merely return to the fundamental point. The Government included this clause in this way because it is absolutely central to a specific group of powers in specific circumstances. Therefore, given such limited circumstances, it would not be right to suggest that this legislation opens the door to an abuse of power by the Executive.

Lord Lyell of Markyate: My Lords, the Minister referred to the draftsman of the Bill as the current editor of Craies, but the noble Lord will know—and anyone in this House, and there are many, will know—that the parliamentary draftsman acts upon the instructions he receives from the Government.

Lord Davies of Oldham: My Lords, of course I accept that point, but the noble and learned Lord will also accept that it is likely that the parliamentary draftsman brought the full weight of his intellect and knowledge to the position that the Government were identifying.

Lord Howard of Rising: My Lords, I thank the Minister for his kind remarks and I am glad that we are converging in our views on this Bill. I am very grateful to the Minister that there will be a chance to review this clause before Third Reading. The issues in the clause are too important not to be resolved in a manner that is satisfactory to the whole House and to the many noble Lords who have raised a number of important points, such as the use of "desirable", which the Minister justified as being in the public interest. I am not sure about that. I look forward to discussing with him the code he mentioned and to hearing how he proposes the narrowing and tightening of the wording in the clause. In the mean time, I beg leave to withdraw the amendment.
	Amendment 54 withdrawn.
	Amendment 55
	 Moved by Lord Goodlad
	55: Clause 75, page 39, line 21, leave out "or desirable"

Lord Goodlad: My Lords, I am most grateful to the Minister for his reply on this group. Like the noble and learned Lord, Lord Morris, I thought that the Minister's explanation for the use—for the first time in British legislation, I think—of the word "desirable" rather than "necessary" was unconvincing. No doubt he will come back to us with any previous use of the word, and no doubt tomorrow your Lordships' Select Committee on the Constitution will carefully study precisely what he said. Perhaps he will revisit the matter at Third Reading. I will be seeking to withdraw the amendment.

Viscount Bledisloe: My Lords, has the noble Lord considered whether it would be in order to bring this matter back at Third Reading? As it has been brought back and fully debated on Report, I should have thought that, under the rules of the House, there is a strong argument that it is not open to him to bring it back. If he can get an undertaking from the Government that they will allow it to be brought back, then well and good; otherwise I do not think that he should seek to withdraw it.

Baroness Noakes: My Lords, I took it from the Minister's comments that, because of the seriousness of the matter, he was prepared for discussions to continue between now and Third Reading, and for the matter to be brought back then if appropriate. I hope he can confirm that that was the basis on which my noble friend has said that he will seek to withdraw the amendment.

Lord Davies of Oldham: My Lords, I am sure that that was the basis on which the noble Lord said that he intends to withdraw it. I can confirm that we intend to discuss the matter further with him and with other noble Lords who have a real interest in the matter.

Lord Goodlad: My Lords, other noble Lords, including the noble and learned Lord, Lord Woolf, are members of the committee and have a great interest in the matter. On the basis that we will have a further opportunity at Third Reading to revisit it in substance, I am content to beg leave to withdraw the amendment.
	Amendment 55 withdrawn.
	Amendment 56
	 Moved by Lord Lyell of Markyate
	56: Clause 75, page 39, line 39, leave out subsection (8)

Lord Lyell of Markyate: My Lords, this amendment conveniently follows the previous group. It proposes leaving out subsection (8). Alternatively, Amendment 57 proposes leaving out subsection 8(c) and (d).
	Subsection (7)(b) provides that an order,
	"may not be made unless a draft has been laid before and approved by resolution of each House of Parliament".
	Therefore, Parliament can retain control under subsection (7). It will be an affirmative resolution, and that is a significant measure of control. I propose deleting subsection (8) because it will remove that measure of parliamentary control. When you reach paragraphs (c) and (d), you discover that the lapse of an order under paragraph (b) does not invalidate anything done under or in reliance on the order before the lapse, and at a time when neither House has declined to approve the order. Paragraph (d) says that the Government can make order after order after order. The Government have suggested, in Amendment 107 and the other two government amendments grouped with it, that if they come back and revise the order, it must be in new terms. Let us hope that they are not cynical about that. I support the Liberal Democrats, who I know are very much opposed to that amendment.
	It is not right for parliamentary control to be removed. What we have here—subject to agreement on the word "desirable", there is a good deal of consensus on this in the House—is effectively a strong and very wide Henry VIII clause that allows for retrospection. Now we reach Clause 75(8) and find that we have retrospection without any parliamentary control if the Government so wish. If they lay an order and things are done pursuant to that order, as presumably it is intended that they should be done—banks will be transferred and so on under the special resolution—then they can never be unscrambled.
	The Minister has told us nine, 10 or 17 times that we are in an exceptionally difficult financial situation. We would all agree with that. However, that is not a reason for removing parliamentary control. The Government are, by their own admission and to put it politely, in a fog. They are not sure what to do. It is difficult to believe that something that they do as a result of late-night meetings will suddenly resolve the world financial crisis in a way that cannot be achieved with up to 28 days—or possibly, if it is just before the Summer Recess, three or four months—of consideration for Parliament to come back and approve it.
	I listened carefully to what the Minister said about how there might suddenly be regulatory penalties or unenforceable contracts that would have to be dealt with. However, those examples, for which we are grateful, do not make the point that parliamentary control should be removed. If a perfectly sensible government proposal is to be implemented but looks as though it might incur regulatory penalties, then a new order could be laid to lift those regulatory penalties retrospectively. Unless the House has lost its marbles—to use rather inappropriate language—and the common sense which normally characterises the dealings of both Houses has gone out the window, the regulatory penalty will be lifted or, alternatively, the unexpected unenforceability of the contract will be rendered enforceable, because that is what people had anticipated and it can be corrected. However, it does not require the exceptional powers of subsection (8)(c), which says that the Government can do it and thereafter it will stand whatever the views of Parliament. I seek to avoid that. I beg to move.

Lord Brabazon of Tara: My Lords, I have to point out that if this amendment is agreed to, I cannot call Amendments 57 to 59.

Lord Stewartby: My Lords, subsection (8) is drafted in a slightly odd way. It appears to mean that when the order is made it is in a conditional state, because if it is not ratified by a resolution of both Houses it ceases to have effect. Is that the normal way in which an order is made? If it is not, it is an extraordinary constitutional invention. Would my noble and learned friend care to comment on that?

Lord Newby: My Lords, I am not an expert on procedure in your Lordships' House, but my understanding is that the rules governing Report stage are significantly more restrictive than the rules governing Committee stage as regards the extent to which a conversation can take place between Members. If I am wrong, I shall stand corrected; but if I am right, perhaps noble Lords would follow that rule.
	In Committee I argued in favour of Amendment 57. I could see the argument for including the clause in the Bill due to the Bradford & Bingley precedent, when the Government had to act near the beginning of a very long recess. It seemed to me that the clause, which deals with the secondary consequences of taking a bank into public ownership or one of the other special resolution regimes, should be able to come into force so that the whole deal was done. You would bring the bank into the special resolution regime and, depending on the extent to which you found it necessary, you would make other changes to the law to allow that to happen by, for example, disallowing provisions of the Companies Act, which in certain circumstances you might need to do. It would be sensible to get a statutory instrument out at the same time and to have it in the public domain so that all those involved would know the Government's intention and the likely outcome.
	The likelihood of a statutory instrument being voted down by Parliament in those circumstances is very rare indeed. When we do attempt to vote down statutory instruments—since I have been here, we have done so probably two or three times—Ministers tell us that we are behaving in a most irresponsible way and it is the end of the constitution as we know it. For that reason, Parliament is very reluctant to vote down statutory instruments. Therefore, by introducing an instrument under this clause, the very strong implication is that that would be the law. In the narrow circumstances of something happening at the start of a recess or when Parliament is not sitting, it would be useful for all involved in bringing a bank into the special resolution regime to have that degree of certainty.
	That brings us to paragraphs (c) and (d). I have no doubt that the Minister will confirm this, but I thought on rereading paragraph (c) that we need it because if you have undertaken a whole raft of provisions under the power, you could not turn the clock back just in respect of the secondary provisions, as opposed to the major provision: that of bringing the bank under the special resolution regime. I persuaded myself—I hope correctly—that paragraph (c) was necessary. As for paragraph (d), however, in Committee several noble Lords were appalled at the thought that if Parliament slung it out, the Government could bring it back and back and back. Therefore, I propose that we should just amend paragraph (d) because if Parliament has allowed an order to lapse—which really means that Parliament has voted against it—it is highly unlikely that Parliament would want another order to come forward.
	The Government's response has been to produce their amendment to deal with the point that they cannot just bring the same order back and back and back by inserting in paragraph (d) the words "in new terms". That goes some way to improve the position in that it would mean that the Government could not just bring back the same order. I am unclear about two things, the first of which is what "new terms" means. Does that mean that they could just change the odd word? How substantive is the phrase "new terms"? Secondly, in the highly unlikely event of Parliament voting down an order, why would the Government feel confident enough to bring forward any other order under the clause?
	I am pleased that the Government have moved a bit, but I am still rather curious about the consequences of where they have moved.

Viscount Eccles: My Lords, Bradford & Bingley is not a good precedent; I shall try to explain why that is my view. First, on a matter of fact, subsection (8)(a) states that an order may be made. In the case of Bradford & Bingley, the order came in front of Parliament at nine o'clock in the morning and came into effect at eight o'clock in the morning. That was because of the trading, or non-trading, of shares on the market. Clearly, it had to come into effect straight away. So I think that the answer to the question raised by my noble friend Lord Stewartby is that the order has immediate effect. The lapsing is a different matter. That is where we have previously got into the issue of unscrambling. It is impossible to unscramble what was done in the matter of transfer of shares, suspension of their trading on the market and all the other things that follow from that.
	The other reason that I think that Bradford & Bingley is not a very good example is that the action took place 10 days before Parliament reassembled. It was not right at the beginning of the long recess, it was late in the recess. As we know, when we returned there was immediately the recapitalisation announcement. It may or may not be that Bradford & Bingley was such a serious threat to the financial stability of the market that it was necessary to do that on 29 September. Noble Lords will know that I have had doubts ever since the order was laid about whether it would not have been possible to wait until the recapitalisation scheme and to have included Bradford & Bingley in the scheme, as opposed to taking the action that was taken at the time.
	I argue strongly to the House that it is not a good idea to proceed on the basis of Bradford & Bingley. Frankly, I am still looking for something that is so unexpected and so difficult that it requires Clause 75(8), although I wholly support the removal of any part of it.

Lord Davies of Oldham: My Lords, I hope I will be briefer in dealing with these amendments than I was with the substantial amendments we discussed in the previous group. We are still dealing with Clause 75. It is a crucial part of the Bill and the Government will not have it amended to the extent that it becomes unusable.
	Of course the House has repeated regularly that Parliament must be allowed to play its essential role in holding the Executive to account regarding this proposed legislation. The clause recognises that by making the exercise of the power subject to the draft affirmative procedure. However, as was pointed out by the noble and learned Lord, Lord Lyell, subsection (8) allows orders to be made under the clause subject to the 28-day procedure. That procedure is designed to cope with matters that have to be dealt with urgently, and in this case, the context is the resolution of a particular failing bank. The order will be used only when absolutely necessary. It is by way of a special provision with regard to affirmative orders, recognising that the Executive must act in certain circumstances and seek parliamentary support afterwards.
	The challenge that we are facing is to enable parliamentary scrutiny without compromising the authorities' ability to use the stabilisation options swiftly and effectively. I am aware that noble Lords, like the Government, have sought a number of ways of tackling what we on all sides appreciate is a thorny issue. We have listened very carefully to the representations that have been made during the passage of the Bill. That is why we have brought forward an amendment that we think meets the concerns expressed.
	I am not able to accept the amendments before the House today other than those proposed by the Government. One option that was suggested, but not brought forward in an amendment, is that Parliament should be recalled. We rejected that. When we are dealing with a volatile situation, the last thing the country would need is the sense of emergency that is heightened by the recall of Parliament. The debate would be taking place in the middle of complex bank resolution and would be fraught with difficulties about how much the Government could disclose about the transactions that were taking place at the time. It would place enormous pressure on both Houses with regard to how they could effect scrutiny while being in the dark about certain parts of the negotiations. What we need is a process that will allow Parliament to hold the Executive to account effectively, while allowing that the bank resolution procedure can work. Recalling Parliament certainly would not work.

Viscount Eccles: My Lords, would the situation be any different if Parliament were sitting?

Lord Davies of Oldham: My Lords, there is an extra drama to the recall of Parliament. After all, it means Parliament comes back to discuss that issue, and that issue alone. While Parliament is sitting, the judgment of the Houses might be in the form of a Statement. We do have examples of that with Northern Rock in the past, not under the special resolution procedure, but where the Government had to deal with a difficult situation. Of course, the Government give the information that they can give to the House within that limited framework, the two Houses reach their judgment on whether the Executive should continue to act in the way in which they are acting and they make provision for parliamentary scrutiny. The most obvious provision with regard to Northern Rock was that the legislation would end after one year.
	I hear what the noble Viscount is saying; that the collapse of a bank is likely mightily to exercise the Members of Parliament in the other place and noble Lords. However, the Government would be able to rely on the good judgment of both Houses in terms of how much the Government were pressed to reveal when discussions were ongoing. If Parliament was recalled solely for that purpose, a Statement, which would convey a limited amount, followed by short questions and answers with no further discussion, would scarcely be looked on as an intelligent use of Parliament's time. A full-scale debate while information was limited would not be in anyone's interests. That is why we are against it.

Viscount Eccles: My Lords, I am sorry to intervene again; I probably did not make myself clear. Even if Parliament was sitting, an order would have had to have been laid, for example, to suspend trading in the shares. That would have happened before Parliament could have any discussion. So even if Parliament was sitting, it would still be faced with action that had been taken that it would be extremely difficult to unscramble under the 28-day procedure.

Lord Davies of Oldham: My Lords, that is certainly so. I hear the noble Lord, Lord Baker, saying from a sedentary position that it is democracy. We are dealing with, effectively, emergency powers being exercised to deal with a complex and difficult financial situation that puts at risk the whole financial position. To suggest that democracy would mean the full participation of both Houses of Parliament in those deliberations would not be a question of democracy but a denial of the proper responsibility of the Executive to sort things out and then to come to Parliament and account for how they had dealt with the matter. That is democracy.
	If the Treasury laid an order and had to wait until it had been debated by Parliament, it would immediately become public that the named bank was in trouble. This could seriously jeopardise the resolution of the issue. For example, it could lead to a run on the bank, while the Government stand helplessly by waiting for the subsequent parliamentary approval. I do not think that the depositors in Northern Rock would have welcomed a position where the Government could give no guarantee to depositors until they had parliamentary approval. What happened was that executive action was taken, and then Parliament debated whether the Government, in the round, had exercised powers properly and to good effect. That must be the reason why we seek to defend the clause.
	Before I talk about the detail of Amendments 57 and 58, I will speak briefly about the 28-day procedure, the purpose of which is to allow instruments to be made and to come into force with immediate effect. It is a dramatic parliamentary procedure, but it is there because Parliament has always recognised that certain actions are necessary to be taken by the Executive which it needs to evaluate, consider and make judgments on. If the actions are not taken, the remedies cannot be applied in certain circumstances. That is the whole basis of why the 28-day procedure is different from the normal affirmative order. As we are all well aware, 28-day affirmative orders are not very common. As the House will appreciate, such an order provides for an enhanced level of parliamentary scrutiny beyond that used in the negative procedure. The order will lapse unless it is approved subsequently.
	In Committee, the noble Lord, Lord Newby, put forward the proposal that the Government might remove paragraphs (c) and (d) of Clause 75(8). We have considered the legal effect of removing these provisions, particularly as some noble Lords suggested that they might bring the matter back on Report. Amendment 57 first seeks to remove paragraph (c). This provision establishes that,
	"the lapse of an order ... does not",
	in broad terms, invalidate things already,
	"done under or in reliance of the order",
	up to that point. This is not unprecedented. Indeed, it is a standard approach.
	The Statutory Instruments Act 1946 makes provision in the analogous circumstances of a negative procedure instrument being annulled by resolution of either House. The 28-day procedure allows orders to be made with immediate effect, followed by parliamentary scrutiny. The authorities could not act if there was a chance that their actions could subsequently be legally invalidated. If we removed paragraph (c) of Clause 75(8), we would not be able to use the 28-day procedure at all.
	Let me give an example of what it would mean if paragraph (c) were to be removed. The authorities may need to resolve a bank where a statutory impediment has been identified in relation to the transfer and it needs to be addressed by provision under this clause. First, for obvious reasons the authorities could not lay an order in draft and wait for it to be debated. This would announce to the world that they were preparing to place the bank named on the order into the special resolution regime, which would immediately prejudice the chances of making the regime effective.
	Secondly, without paragraph (c) the authorities could not make an order under the 28-day procedure. They would be acutely aware that should Parliament later fail to pass resolutions affirming the order, everything that had been done would be unlawful. Faced with this prospect, the authorities would not be prepared to take the risk. Again, that jeopardises the whole concept of the resolution procedure. In short, the authorities would be simply unable to take the necessary action, which in turn would jeopardise the possibility of effecting a resolution if paragraph (c) of Clause 75(8) should be removed.
	The Government also looked very carefully at paragraph (d) of Clause 75(8) because that, too, was substantially debated in Committee. Irrespective of the provisions of this power, as the House will be aware, it would be politically and unconstitutionally untenable for Ministers to behave as if they were repeatedly introducing the same order. I would ask the House to appreciate what the response of Members of either House would be if the Government got past the problem of dealing with legislation by a constant repetition of an order whose procedure is drafted against emergency or crisis or dramatic circumstances. Although we recognise the concern, it would not be practical to remove paragraph (d) and under the Statutory Instruments Act 1946, to which I referred earlier, a similar clarification is made in the context of negative procedure instruments. It is not realistic to think that a Government would use this procedure repeatedly.
	Government Amendment 59, which is supported by further government amendments, seeks to establish beyond all doubt that the Government will not bypass Parliament by repeatedly laying identical orders. For the sake of consistency, this issue is addressed throughout the Bill, which is why we have put down government Amendments 107 and 117. The Government need to retain the power to make a further order should one lapse, not least to have an opportunity to address the concerns raised by Parliament, which may not relate to every aspect of the order. It is not the purpose of the paragraph to allow identical orders to be repeatedly laid. We do not think it could be construed in that way, nor is it conceivable that the Government would act in such a matter.
	However, in view of the concerns expressed in the House on this point, our amendment seeks to make express what is already implicit, namely that the new order will not be the same as the old; it will not be in the same terms. I hope that it will therefore be recognised that the Government have listened to anxieties about a repetition of exactly the same order being made in the same terms. I am indicating that the Government would have to change the terms of the order to comply with this legislation.
	Does that mean, as far the question asked by the noble Lord, Lord Newby, is concerned, that all we will have done is change the punctuation or made such a minor change as to be of no significance? We think that the effect of requiring the order to be made in new terms will be that we are not dealing in trivia. The Government believe that this amendment sends a clear signal that, if Parliament declines to approve an order made under this proposal, Ministers will have the opportunity to make a new proposal to Parliament for approval in materially different terms—and those terms would be materially different. We do not think that the Bill should be more prescriptive on this, other than to require in very clear terms that the new order must be "in new terms" in comparison with the old. Accordingly, in due course I will seek to move.

Lord Howard of Rising: My Lords, will the Minister include the word "material", which he has just mentioned but which is not in the amendment?

Lord Davies of Oldham: No, my Lords, but the order will be "in new terms", as I have expressed from the Dispatch Box in response to the point that exercised the noble Lord, Lord Newby. The issue is that we are not laying the same order. Any Government would be obliged to lay a new order "in new terms". I do not think that it is realistic to ask us to be prescriptive about what that new order could look like, because we are dealing with circumstances that we cannot readily foresee, except in terms of their urgency and seriousness. We do not need to include "material". The concept of "in new terms" means that the order must be different from the previous one. That is why I am able to disavow the notion that the order would just contain a minor change.

Lord Newby: My Lords, on a point of clarification, could the noble Lord confirm what I think I heard him say, which is that any second order would be produced in new terms, with those terms reflecting the views of Parliament on which parts of the previous order were unacceptable and which parts it might wish to see carried forward?

Lord Davies of Oldham: My Lords, the whole point about the restrictive time with regard to the order is to give the opportunity for Parliament to express its views on it. The Government would be concerned that, when they produced a new order in new terms, it would be acceptable to both Houses of Parliament. So the answer is certainly in the affirmative.

Lord Mackay of Clashfern: My Lords, could the noble Lord explain further how this would work? If the first order is fully implemented at the time of its being turned down by Parliament, paragraph (c) keeps all that has happened in place as lawful. If you come along with a new order, are you undermining or cancelling what has already been done, or is it only valuable to have this power if there is something still to be done under the old order which has not yet been fully completed?

Lord Davies of Oldham: My Lords, the reason for the new order would be unfinished business. If the matter had been concluded, the 28-day provision would allow for parliamentary judgment and the accountability of the Executive to be exercised in the debate on the order. A new order would betoken the fact that there were outstanding issues.

Lord Lyell of Markyate: My Lords, I am a little disappointed that the Minister has once again waved his shroud. Every time an objection is made to the structure of the clause, we seem to be told that the whole financial system will collapse into ruins unless we can do without Parliament. Subsection (8) says in effect that the Treasury, if it thinks it necessary, can make any order that it likes and Parliament can do nothing about it. Parliament can disapprove of the order later, but by that time everything would be done and dusted, so why would we be asked back even to consider it? We could simply have a Motion to discuss the financial system of this country; it would have no more or less power than we have under the clause.
	The Minister got close to illuminating the position under Clause 75, particularly its retrospective aspects, when he made the point that you might find that you had ignored some detailed provision about regulatory penalties or some detailed provision that rendered some contract or transaction unenforceable. At the end of our previous debate, I suggested to the Minister that, when you have a glitch of this sort and make an amending order, you can confidently expect that Parliament will be thoroughly sensible and will approve it 99 times out of 100, or even 999 times out of 1,000. However, the clause sets up a structure that is much broader. My objective is not that the Government should not have the power to make the special resolution procedures work—we all want them to work and to work efficiently—but that the procedures should be subject at least to basic parliamentary control.
	The clause takes a belt-and-braces approach and is completely on the level until the end of subsection (7), which says:
	"An order ... shall be made by statutory instrument, and ... may not be made unless a draft has been laid ... and approved".
	That is normally what happens. I imagine that that is how the Government will construct the special resolution procedure and that they will want to make subsequent amendments to iron out little details. So long as they are sensible, they can confidently expect the support of Parliament, but they have given themselves the power to do the whole lot without the approval of Parliament. They do not need that. That is contrary to the whole objective of Parliament. The Minister has not addressed that point and I ask him with great respect to think again before Third Reading and not to cut us off now in our debates. If he comes back with a compelling answer, I am quite certain that anyone who may be mildly persuaded by what I am saying will change their mind. I shall certainly feel a great deal more comforted—I think that the House as a whole might, too—so I ask the Minister to do that.

Lord Davies of Oldham: My Lords, of course we recognise that there are anxieties over Clause 75. I already indicated, with regard to the formal group of amendments, that we were eager to discuss this further, given the strength of representation on the matter. I accept the noble and learned Lord's point, but we are debating an affirmative order that is related to an emergency provision, so there is not much room for movement. We have explored these issues extensively, but it goes without saying that I will reflect on what has been said in this afternoon's debate.
	I always stand ready to meet noble Lords about these matters. We are not presenting, within this framework, anything particularly exceptionable: 28-day orders are not used frequently, but they have been in existence for well over half a century and they relate to emergency provisions. The Executive must of course be held to account, but it is not possible, in dealing with a bank resolution under these special resolution procedures—we are talking about a highly specific context in which these powers are exercised—for a judgment to be made subsequently that people acted unlawfully and could therefore be found guilty accordingly. The bank resolution procedure could not possibly work like that. That is why we are so firm about the necessity of the clause as it stands. However, I assure the noble and learned Lord that I will meet him at any time, with my officials, to discuss this matter further.

Lord Lyell of Markyate: My Lords, the Minister has said that debate on this aspect can continue at Third Reading, on the understanding that there should be a good reason for doing so. I remind him that we are not talking about what has been going on since 1946, which is that prospective orders are made and then things are done. We are dealing with the dangers of retrospection. On the understanding that we can keep discussion alive, I beg leave to withdraw the amendment.
	Amendment 56 withdrawn.
	Amendment 57 not moved.
	Amendment 58
	 Moved by Lord Newby
	58: Clause 75, page 40, line 6, leave out paragraph (d)

Lord Newby: My Lords, my reason for moving this amendment was to ensure that the Government could not repeatedly override the rule of Parliament. The Minister has explained that the purpose of his amendment is to enable Ministers to reflect the will of Parliament, should an initial order be overturned. On that basis, I am happy to withdraw my amendment.
	Amendment 58 withdrawn.
	Amendment 59
	 Moved by Lord Myners
	59: Clause 75, page 40, line 7, at end insert "(in new terms)."
	Amendment 59 agreed.
	Amendment 60
	 Moved by Lord Myners
	60: After Clause 80, insert the following new Clause—
	"Temporary public ownership: report
	(1) Where the Treasury make one or more share transfer orders under section 13(2) in respect of a bank, the Treasury must lay before Parliament a report about the activities of the bank.
	(2) The first report must be made as soon as is reasonably practicable after the end of one year beginning with the date of the first share transfer order.
	(3) A report must be made as soon as is reasonably practicable after the end of each subsequent year.
	(4) The obligation to produce reports continues to apply in respect of each year until the first during which no securities issued by the bank are owned by—
	(a) a company wholly owned by the Treasury, or
	(b) a nominee of the Treasury."
	Amendments 61 to 63 (to Amendment 60) not moved.
	Amendment 60 agreed.
	Clause 81: Temporary public ownership
	Amendment 64
	 Moved by Baroness Noakes
	64: Clause 81, page 42, line 13, at end insert—
	"( ) Condition 4 is that the bank represents at least one half of the turnover, balance sheet total or number of employees shown in the group accounts of the holding company at the latest date for which the holding company has prepared group accounts."

Baroness Noakes: My Lords, Amendment 64 would add an extra condition to the use of the bank holding company nationalisation powers set out in Clause 81. The new condition is that the bank represents at least half of the group's turnover, balance-sheet total and number of employees, as shown in the latest group accounts. This is a form of words that is used in the Companies Act. I was initially intrigued by the Minister's description of the rationale for Clause 81 when it was introduced by amendment in Committee. The Minister ended his explanation by saying:
	"Finally, a private sector solution may be more likely on a group-wide than a bank-only basis. This is particularly the case if other non-bank parts of the group are attractive to buyers".—[Official Report, 20/1/09; col. 1578.]
	That rang alarm bells. The scenario is that a successful group has a relatively small bank which is failing. The relevant authorities think how easy it would be to get rid of that small bank if they wrapped it up in those other nice businesses, so instead of expropriating a bank with, say, 500 employees, they take hold of a large enterprise with 10,000 employees. My real life example for the Minister is this: would Clause 81 allow the Treasury to grab hold of Tesco, which since a while ago has held 100 per cent ownership in a bank? The same does not apply to Sainsbury's. This is my Tesco amendment in another sense, too, and, with a nod to its strapline, every little helps to clarify the nature of this legislation. I beg to move.

Lord Myners: My Lords, I hope to still the alarm bells and replace them with melodious chimes. The amendment proposed by the noble Baroness, Lady Noakes, follows on from our constructive debate in Committee on holding companies. It would restrict the Government's power to take a holding company into temporary public ownership to cases where more than half of the holding company's business, measured by a number of alternative metrics, is in the bank. I can see the purpose behind the amendment. The noble Baroness seeks to make it clear that the Government would not be able to nationalise a holding company that happened to include a small failing bank. However, that is already provided for in the conditions set out in the Bill, as amended in Committee.
	Clause 81(3) provides that the Treasury may take action with respect to the holding company only if the specific conditions for temporary public ownership, as set out in Clause 9, are met. Let me help by repeating those specific conditions: first, the exercise of the power is necessary to resolve or reduce a serious threat to the stability of the financial systems of the United Kingdom; or, secondly, the exercise of the power is necessary to protect the public interest where the Treasury has provided financial assistance in respect of the bank for the purpose of resolving or reducing a serious threat to the stability of the financial systems of the United Kingdom. Moreover, Clause 81(3) requires that it be necessary to take action in respect of the holding company; that is, the holding company cannot be taken into temporary public ownership if the conditions for Clause 9 could be satisfied by taking action in respect of the failing bank alone.
	I make it quite clear that these conditions would not be at all likely to be met with respect to a holding company containing a very small bank, as might apply at the moment to Tesco, although I suspect that that bank might become very large, and certainly no other financial institutions in the group, however subservient they might be to the holding company.
	That last point brings me to one problem with the amendment. It would prevent the Treasury from taking action where a group contained a failing bank representing, for the sake of argument, 40 per cent of its business, a healthy insurance company representing 40 per cent and a healthy investment bank, if that is not an oxymoron, representing the final 20 per cent. One of the reasons why we have had to take these powers is the complex and interrelated business structure of financial groups. The SRR powers, as they stand in relation to banks, will allow the banks in such groups to be resolved. But there is the risk that resolution of the bank would not prevent contagion to other financial institutions in the group, the failure of which could also pose a real threat to financial stability. Nor would the amendment allow for action to be taken with respect to holding companies that contained multiple banks that might each represent less than half of the group's business.
	Fundamentally, the problem with this amendment is that it seeks to set an arbitrary threshold for the Treasury to be able to intervene and to hardwire this into the Bill. I believe that the approach that we have taken, which provides the Treasury with the flexibility to act depending on whether action is in the public interest, is more appropriate and will lead to less uncertainty and confusion. I hope that this has satisfied the noble Baroness that her amendment is not necessary or appropriate.

Baroness Noakes: My Lords, I thank the Minister for setting that out. I am not entirely clear that the Treasury, which is quite capable of interpreting the public interest and financial stability in quite imaginative ways, as I think we have seen in the way in which they have approached some recent issues, might not make a case one day to take over Tesco plc. Perhaps we can leave Tesco to fight that battle for itself. I beg leave to withdraw.
	Amendment 64 withdrawn.
	Amendment 65
	 Moved by Baroness Noakes
	65: After Clause 81, insert the following new Clause—
	"Holding companies: objectives and code of practice
	(1) The relevant authorities shall have regard to the special resolution objectives set out in section 4 in using or considering the use of the power in section 81.
	(2) The code of practice issued under section 5 shall include guidance about the use of the power in section 81."

Baroness Noakes: My Lords, Amendment 65 would add a new clause after Clause 81. This picks up from an issue that we debated in Committee, when I asked about the relationship of the new holding company power to the special resolution regime in the earlier part of the Bill. The Minister told me that the code of practice applied to the new holding company powers. I have now had an opportunity to look at that issue and I am not entirely clear about it. That is why I have tabled this amendment.
	Clause 81 says that the Treasury may take a bank holding company into temporary public ownership,
	"in accordance with section 13(2)".
	However, Clause 13(2), merely talks about the ability to make share transfers. Clause 13(1), which is not referred to in Clause 81, refers to the third stabilisation option and therefore, presumably, would pull in the other powers. Clause 82(1) refers specifically to Clause 13(3), which deals with the code of practice making provision about management. There is no other reference to the code of practice, which implies that the code does not otherwise apply. That is the reverse of what the Minister was suggesting in Committee and the Minister's officials have suggested subsequently.
	The various piecemeal references in Clause 82 to odd clauses in Part 1 imply that the holding company nationalisation power is not firmly placed within the special resolution regime and therefore, it is not easy to read across Clause 4 with the objectives or Clause 5 with the code, because of the way it appears to draw in small bits from that part. I tabled this amendment again because I am unclear about the relationship between the power in the new Clause 81 and the regime set out in the early part of Part 1. I beg to move.

Lord Myners: My Lords, the intention behind this amendment is to ensure that the special resolution objectives, under Clause 4 and the code of practice, under Clause 5, apply to the powers to take a bank holding company into temporary public ownership.
	I shall be brief in explaining how this is already the legal effect of the Bill and, therefore, why this amendment is unnecessary. The power to take a bank holding company into temporary public ownership involves the use of the share transfer power. Clause 81(1) of the Bill enables the Treasury to take a bank holding company into temporary public ownership in accordance with Clause 13(2), which provides that temporary public ownership may be effected through the making of share transfer orders. This power to make a share transfer order is, under Clause 1(4), defined as one of the stabilisation powers of the Bill.
	The special resolution objectives and the code of practice already clearly apply to the stabilisation powers under the provisions of Clauses 4 and 5. Accordingly, holding company temporary public ownership, which, as I have described, can only be achieved through the stabilisation powers, clearly attracts these provisions. Therefore, the Bill already has the legal effect that the noble Baroness is seeking. The draft code of practice will, in due course, be updated to include provision about the bank holding company temporary public ownership power. On the basis of this explanation and assurance, I ask the noble Baroness to withdraw her amendment

Baroness Noakes: My Lords, I am grateful to the Minister for setting that out for the record. I am sure he is right about that interpretation—we must hope that he is. I beg leave to withdraw the amendment.
	Amendment 65 withdrawn.
	Clause 82 : Supplemental
	Amendment 66
	 Moved by Lord Myners
	66: Clause 82, page 42, line 21, at end insert—
	"( ) section 10(1),"
	Amendment 66 agreed.
	Amendment 67
	 Moved by Baroness Noakes
	67: After Clause 168, insert the following new Clause—
	"Compensation limits
	After section 213 of the Financial Services and Markets Act 2000 (the compensation scheme) insert—
	"213A Compensation payable to depositors
	(1) Each depositor will be entitled to receive from the scheme manager in respect of each bank brand a sum which is the lower of—
	(a) the deposit protection amount; and
	(b) their gross balance held by the person.
	(2) The "deposit protection amount" is £50,000.
	(3) The Treasury may by order amend the figure in subsection (2).
	(4) The Treasury may by order either in general or specifically determine what constitutes a bank brand.
	(5) An order under this section may not be made unless a draft statutory instrument containing such an order has been laid before, and approved by a resolution of, each House of Parliament.""

Baroness Noakes: My Lords, this amendment would introduce a new clause after Clause 168. It is the same amendment that I introduced in Committee regarding the Financial Services Compensation Scheme. I did not feel that the Minister gave entirely satisfactory answers then, so I have returned to it. In particular, I did not think he recognised the political significance of the need to change the way that the scheme is operated.
	My new clause, which would amend the Financial Services and Markets Act, would do basically three things: it would use a bank-brand basis for deposit compensation, with the Treasury defining what that was; it would use a gross balance concept for compensation; and it would set the deposit compensation limit at £50,000 with a Treasury power to raise it. At the moment, the FSA has control over those things. I will not rehearse the arguments that we had in Committee but, broadly, we—and, I think, the Liberal Democrats—did not think that the FSA had been seen to be fleet of foot in the past. It took ages to up the compensation limit to £50,000 and it still has not dealt with the branch bank issue or the gross balance issue, notwithstanding the increased focus in the light of the events of the past year. The noble Lord, Lord Newby, demolished the FSA's "let's wait for Europe" line in Committee. All these issues are fundamentally political, but the FSA is not, or ought not to be, political. The Government rightly have no power of direction over the FSA, so Parliament is the right place for decisions of this nature to be made.
	Given that the FSA does not have a reputation for speedy responses, we believe it is right that the Government, with Parliament, should be in control of these important issues. We recognise that the FSA has a new chairman who is much respected in your Lordships' House, but he has nearly a decade of attitudes and practices to overturn and make more workable, and this is not necessarily going to be at the top of his priorities. Issues like the levels and nature of compensation have such a resonance that they ought to be handled in an arena such as Parliament. I beg to move.

Lord Myners: My Lords, the purpose of Part 4 is to make a number of changes to Part 15 of the Financial Services and Markets Act, which provides the legal framework for the Financial Services Compensation Scheme. As I explained in Committee, that framework already allows the Financial Services Authority to deal in its rules with most features of the compensation scheme, and I am afraid I have to take the same view of the noble Baroness's amendment now as I took then. However, I shall address some of the points raised in Committee and again today, and I hope I shall be able to convince your Lordships that the matters in the amendment are best dealt with by the FSA in its rules.
	First, there is the question of the speed with which the FSA can make its rules. The Financial Services and Markets Act 2000 lays down a process that the Financial Services Authority must follow in making its rules. This process normally involves public consultation so, with the best will in the world, it will take a minimum of three months. In practice, of course, it will take longer if a full and open consultation is to be pursued. One must allow also for internal consideration, informal consultation and discussion papers and consideration of the responses to consultation. I am sure that your Lordships would agree that where Parliament confers wide-ranging powers to make rules on a body such as the FSA, there is real merit in having such processes in place. But the Financial Services and Markets Act also allows the FSA to short-circuit this process if it,
	"considers that the delay involved in complying...would be prejudicial to the interests of consumers".
	It is under that provision that the FSA acted to remove the co-insurance element in the deposit protection rules of the Financial Services Compensation Scheme in September 2007 and to raise the deposit compensation limit to £50,000 in October 2008. I struggle to agree, therefore, with the noble Baroness, who says that the FSA has not always evidenced the capacity to be fleet of foot; or indeed with the observation in Committee by the noble Lord, Lord Newby, that the FSA had been,
	"dilatory beyond measure in increasing the limit to £50,000".—[Official Report, 20/1/09; col. 1656.]
	An increase to £50,000 had already been widely discussed, including in the authority's joint consultation documents on financial stability and depositor protection, which preceded the Bill, while the specific FSA proposal to raise the limit to £50,000 had been known since July 2008.
	In the circumstances of last autumn, when ongoing market turbulence meant that consumers appeared to be increasingly concerned about the level of coverage available for their savings, the FSA decided that an immediate increase to £50,000, without formal consultation, was in the interests of consumers to reduce any continuing uncertainty. I do not see how the Treasury could have acted more swiftly, particularly if the necessary regulations were subject to the affirmative procedure. Clearly, it would be impossible to move as swiftly with the draft affirmative procedure if Parliament was not sitting.
	I accept, of course, that it would make little or no difference in normal circumstances. The Treasury would obviously consult widely before producing a draft regulation. It may even publish draft regulations for consultation before they were laid in Parliament. But normal circumstances are not the problem. I have no doubt that when it comes to unusual circumstances, the FSA is better placed to move quickly and has already demonstrated that it can do so.
	On the content of the regulations, the noble Baroness, Lady Noakes, argued in Committee—and I think the noble Lord, Lord Newby, agreed with this—that some decisions about the compensation scheme were too important to be left to the FSA. They were, as she said today, as much political as technical.
	I see the point, but I think that there might be a misunderstanding about the nature of what we might call the legislative hierarchy in the Financial Services and Markets Act. Essentially, the Act provides for the framework for the regulation of all financial services in the United Kingdom—not just banking. Some aspects of that framework are set out in the Act itself; other aspects of the framework are provided in secondary legislation made under the Act.
	Detail, on the other hand, is left for the Financial Services Authority to deal with in its rules. So the distinction is not between what is political and what is technical but between what is framework and what is detail. I would also say that the political/technical distinction would be an unworkable basis for deciding what should be in primary or secondary legislation and what should be in the FSA's rules. What may be political to one person may be technical for another. What was political one day might be technical the next—or vice versa. How many people would have described the deposit compensation limit as political two years ago? And if the deposit compensation limit is political today, why is the investor compensation limit not political? If paying compensation on a per-brand basis is political, why are the eligibility criteria for FSCS claimants not political?
	As I said in Committee, it would be inappropriate simply to put matters relating to deposit-taking in primary legislation. The FSA is better placed in practice, and more logically placed in the FSMA legislative hierarchy, to consult and make rules on these matters, as it is on the other detailed matters in the compensation scheme, and in financial services regulation more generally. I therefore ask, most pleasantly, that the noble Baroness, Lady Noakes, withdraw Amendment 67.

Baroness Noakes: My Lords, I am touched by the Minister's faith in the FSA's ability to deliver. The Minister referred to the FSA's view being known since July 2008. The issue was around in 2007. We had to wait for a long time until the FSA actually said that it would be £50,000, and we still do not have it. There is deep frustration with the FSA's inability to act. This is probably just one in a number of examples of how the FSA operates, and it is probably wrong to focus on three aspects of one compensation scheme when the issues with the FSA are so much bigger.
	One hopes that if the noble Lord, Lord Turner of Ecchinswell, reads Hansard, for which I do not suppose he has time, he might note that, from what has been said both here and in Committee, the organisation that he now chairs is not held in particularly high regard in a number of respects. I accept that this would not be an appropriate time to make a piecemeal change and, on that basis, I beg leave to withdraw.
	Amendment 67 withdrawn.
	Clause 190: Directions
	Amendment 68
	 Moved by Lord Davies of Oldham
	68: Clause 190, page 101, line 37, at end insert—
	"(3) Before giving a direction the Bank must notify the Treasury.
	(4) The Treasury may by order confer immunity from liability in damages in respect of action or inaction in accordance with a direction.
	(5) An immunity does not extend to action or inaction—
	(a) in bad faith, or
	(b) in contravention of section 6(1) of the Human Rights Act 1998.
	(6) An order—
	(a) shall be made by statutory instrument, and
	(b) shall be subject to annulment in pursuance of a resolution of either House of Parliament."

Lord Davies of Oldham: My Lords, I move this government amendment in the name of my noble friend and will speak also to Amendment 115. I note that the noble Baroness, Lady Noakes, also has an amendment in this group.
	We have given careful consideration to the points made by the noble Baroness in Committee regarding exemptions from liability for payment system operators acting under direction from the Bank of England. We know that she has been in touch with the Payments Council, a key representative body of payment system operators. I thank her for bringing the concerns of that body to the attention of the House. It is a valuable representation.
	In Committee, the noble Baroness referred to a scenario in which an operator could be instructed by the Bank of England, under its power to give directions, to continue to allow a failing bank to participate in a payment system even where that bank no longer met the criteria for participation. The point was raised as to whether the operator would be provided with an exemption from the Bank in respect of any liability in damages arising from acting in accordance with the Bank's direction.
	The power to give directions is intended to provide a tool for the Bank to use in furtherance of the objectives of this part of the Bill; that is, to ensure that recognised interbank payment systems are operated in a manner that minimises deficiencies and disruptions that could threaten the stability of, or confidence in, the UK financial system, or have serious consequences for businesses or other interests throughout the UK. Therefore, we do not envisage circumstances in which the power would be exercised in the manner suggested by the noble Baroness.
	Given her concern, however, we have sought to address the matter further. The government amendments in this group would confer a power on the Treasury to grant an operator exemption from liability in damages for acts or omissions carried out in accordance with a direction, if this is appropriate in the circumstances. Amendment 68 enables the Treasury to,
	"confer immunity from liability in damages in respect of action or inaction in accordance with a direction".
	Amendment 115 is consequential, updating the statutory instrument table in Part 8.
	We consider that the Bank should notify the Treasury before making a direction so that the Treasury has an opportunity to consider whether it would be appropriate to make an exemption order. As the Bank may need to give a direction urgently in the interests of financial stability, we consider that the order should be subject to the negative resolution procedure. For obvious reasons, it will be important that any exemption is in place at the time the direction is given.
	The noble Baroness's amendment would give a rather more blanket exemption from liability in damages in respect of actions or inactions taken in accordance with any direction of the Bank. We do not think that such an exemption is appropriate. We have accepted that there is a need to have this power but it would not be appropriate to give an exemption from liability in damages in all cases. For example, if the Bank merely directs that an operator should comply with specific minimum standards in respect of business continuity, no such exemption from liability would be necessary. I hope that I have established the case for the government amendment and that the noble Baroness will not move her amendment.

Baroness Noakes: My Lords, as I said at the beginning of Report, we tabled a number of amendments before the Government tabled theirs. However, I fully accept that the Government have responded to the concerns that I raised in Committee and am grateful to them for so doing; so, too, is the Payments Council. I should say for the avoidance of doubt that I advocated this change to legislation in the context of having no interest to declare thereto.

Lord Davies of Oldham: My Lords, I am overwhelmed but not surprised by that graciousness.
	Amendment 68 agreed.
	Amendment 69 not moved.
	Clause 197: Penalty
	Amendment 70
	 Moved by Lord Davies of Oldham
	70: Clause 197, page 104, line 10, at end insert—
	"(3) The Bank must prepare a statement of the principles which it will apply in determining—
	(a) whether to impose a penalty, and
	(b) the amount of a penalty.
	(4) The Bank must—
	(a) publish the statement on its internet website,
	(b) send a copy to the Treasury,
	(c) review the statement from time to time and revise it if necessary (and paragraphs (a) and (b) apply to a revision), and
	(d) in applying the statement to a compliance failure, apply the version in force when the failure occurred."

Lord Davies of Oldham: My Lords, I shall speak also to government Amendment No. 73. I shall, of course, also comment on other amendments in the group.
	In Committee, the Government committed to revisiting before Report the penalty clauses of Parts 5 and 6. Having reflected on the comments raised in Committee and by the Delegated Powers and Regulatory Reform Committee, we have tabled amendments to address the concerns raised.
	I note that the noble Baroness has laid similar amendments. I think it is clear from the nature of our amendments that we largely agree on the basis on which to proceed, but I will explain why I believe that the Government's amendments are necessary. Government Amendment 70 provides that the Bank of England must prepare and publish a statement of the principles which it will apply in determining whether to impose a penalty and the amount of the penalty in respect of a compliance failure under Part 5. It is intended that these principles will preserve the Bank's discretion in assessing whether to impose a penalty and the quantum of that penalty but will enhance the transparency of the enforcement regime, which was a focal point of a great deal of our deliberations in Committee.
	These principles will no doubt reflect the range of factors that will need to be taken into account in the decision process; for example, the scale of the compliance failure and the seriousness of the consequences arising as a result of the failure, the resources of the payment system and the frequency of the offence. However, in the interests of preserving the Bank's discretion in preparing and issuing the statement, we do not consider it appropriate to specify in the Bill the factors that must be taken into account by the Bank.
	The statement of policy must be published on the Bank's website and a copy must be sent to the Treasury. This publication requirement is adequate to ensure that the policy is brought to the attention of operators of recognised interbank payment systems and the general public. The Bank must review and revise a policy from time to time, as appropriate. In the interests of fairness, naturally any penalty imposed by the Bank must be in accordance with the published policy at the time that the compliance failure was committed. This offers guidance to operators of recognised interbank payment systems, while maintaining the necessary flexibility for the Bank to impose appropriate penalties in all relevant circumstances. I hope it will be recognised that the Government have responded to anxieties about transparency expressed during Committee.
	I turn now to Part 6. In Committee, we sought to demonstrate that the banknote regulations will set out the matters about which banknote rules may make provision. The regulations are subject to the draft affirmative procedure, and so I set out the Government's case that the parliamentary scrutiny to which the regulations would be subject would ensure that there was no inappropriate delegation to the Bank in making banknote rules.
	However, we have reflected on the comments made in Committee and, of course, we have noted with great care the comments of the Delegated Powers and Regulatory Reform Committee. This amendment provides that the Treasury must specify in banknote regulations a method for determining the maximum amount of penalty that may be imposed by the Bank for a breach of regulations or rules. I hope that this amendment addresses concerns that the Bank could conceivably have been enabled to set unlimited penalties under the banknote rules.
	It is intended that the banknote regulations will set out a formula for calculating the penalty to be imposed for under-backing and will make provision in relation to a statement of policy on penalties to which the Bank must have regard when determining the maximum level of the penalty imposed. I should bring to the attention of the House that provision has already been drafted at paragraph 4 of Schedule 1 to the draft banknote regulations providing that the amount of any penalty must be determined in accordance with a published statement of policy.
	Thus, I believe that government Amendment 73, together with existing provisions of the regulations, meet the concerns of the noble Baroness, Lady Noakes, and the noble Lord, Lord Howard, expressed in Committee and in their amendment.
	Finally, as regards making express provision in the Bill in respect of the statement of policy on penalties imposed under Part 6, we have conceded that an amendment to this effect is necessary to Part 5 of the Bill, but it is neither appropriate nor necessary in relation to Part 6. I beg to move.

Baroness Noakes: My Lords, I thank the Minister for tabling Amendments 70 and 73, which deal with the matters covered by my amendments in this group. I tabled them before I had sight of the government amendments. My amendments took up many more lines of the Marshalled List, because I had lifted them from the Financial Services and Markets Act 2000, but the Government's much shorter amendments are quite fit for purpose.
	Amendment 70 agreed.
	Amendments 71 not moved.
	Clause 221: Financial penalty
	Amendment 72 not moved.
	Amendment 73
	 Moved by Lord Davies of Oldham
	73: Clause 221, page 113, line 16, at end insert—
	"(3) Banknote regulations must establish a method for determining the maximum amount of a penalty."
	Amendment 73 agreed.
	Amendment 74 not moved.
	Clause 227: Consolidated Fund
	Amendment 75
	 Moved by Baroness Noakes
	75: Clause 227, page 115, line 15, at end insert—
	"( ) Subsection (2) shall cease to have effect 2 years after this Act is passed except in respect of expenditure incurred in pursuance of obligations entered into before that date."

Baroness Noakes: My Lords, Amendment 75 amends Clause 227 by placing a two-year sunset provision on the powers in subsection (2). The power in the clause was already very wide when the Government introduced the Bill to the other place in October, but it was intended for financial stability purposes. That was clear from the debates in another place, and that was the basis on which we accepted the power.
	In Committee in your Lordships' House, the Government radically changed the scope of the powers in the clause by allowing any Secretary of State, not just the Treasury, to give financial assistance on a very wide basis. That basis is set out in subsection (2). The Minister agreed in Committee that the planned use of this power would go way beyond mere financial stability, public confidence in banking systems and depositor protection.
	In ordinary times, we would have said that it was inappropriate to include such a power in the Bill; that if Secretaries of State needed legislative cover for their schemes, they should go and get it themselves. However, as I said in Committee, we accepted that these were not ordinary times and we did want to impede the measures that the Government are taking. We did feel, because of the extraordinary nature of the powers, that they should be sunsetted after two years. In Committee, the Minister pointed out that my sunset clause would not have allowed money to be paid out in respect of obligations entered into in the two-year period, and that this would kill off some schemes currently being introduced, which are based largely on guarantees. I had not intended that effect, and my amendment for Report leaves cover for obligations entered into in the two-year period. The idea is that, if there is a continuing need for financial assistance by one of more Secretaries of State at the end of the two-year period, it would be open to that Secretary of State to bring forward his own legislation. Alternatively, in extremis, the Government could bring forward a one-clause Bill to extend the powers in the clause for a further period. Obviously, if circumstances still merited it, I am sure that both Houses would facilitate the passage of such a short Bill.
	If we allow the Bill to contain this clause without further restraint, we will be giving the Government a power to spend what they like, when they like, for ever and a day. Any power, including a financial power, that is taken in an emergency is customarily sunsetted. I am disappointed that the Government have not yet recognised that. I beg to move.

Lord Newby: My Lords, we tabled an amendment in Committee for a sunset clause for the whole Bill. It did not find favour with the Government, nor with the noble Baroness. However, half a loaf is better than no bread, and this is a little sunset clause. Although it does not go as far as we want, at least it is a sunset clause.

Lord Stewartby: My Lords, it is indeed a sunset clause, albeit of a limited kind, which I think is needed in a case like this. There are so many different powers in the Bill that the Government, or various arms of the Government, may wish to pursue, that putting a termination date on this part of it seems necessary. Personally, I would have accepted a period of three years rather than two, given the speed at which things change. However, the Bill is unusually complex and has been put together, at great speed, against a background of changing conditions in the marketplace and in activities that are covered by it. While I would be content with a slightly longer period than two years, some termination and restraint on the timing is necessary. Therefore, I favour the amendment.

Lord Myners: My Lords, the purpose of Clause 227 is to provide statutory cover for expenditure incurred under Parts 1 to 3 of the Bill, or in giving financial assistance more generally to benefit financial institutions and their customers, in order to enable the Government's response to the current difficult economic climate to be taken forward expeditiously. The purpose of subsection (2) is to provide that essentially routine statutory coverage for expenditure for schemes that might be operated by the Treasury or other departments, but which are not directed solely at assisting banks or other financial institutions.
	One would normally include this provision in legislation brought in by the appropriate government department. However, these are extraordinary times and the Government have had to move with urgency to bring forward measures, such as the homeowner mortgage support scheme or the working capital scheme, to deal with the situation. That does not mean that the Bill is not about banks and financial institutions. Clause 227 is still primarily about providing statutory cover for the provision of financial assistance in connection with the SRR, or to banks or financial institutions.
	Financial assistance provided to banks and financial institutions may also benefit other persons; for example, the customers of banks, a particular industry or part of the economy, or the economy as a whole. Schemes such as the homeowner mortgage support scheme are a good example of this. The scheme provides assistance to banks, but allows them to adopt a more flexible approach to homeowners struggling to make their mortgage repayments. Thus it also assists homeowners. Without subsection (2), there would be doubt about whether mixed schemes of this kind, which facilitate the bank or financial institution in carrying on its business and which also assist third parties, are covered by the provision.
	Amendment 75 would limit the scope of such schemes to two years. It would mean that, on the expiry of the subsection, a narrower, technical approach to the provision of financial assistance to banks and financial institutions would have to be taken. Each scheme would have to be closely analysed to determine the "real" beneficiaries of any assistance. I do not see merit in this approach.
	I appreciate the concerns behind the amendment. I recognise also that the noble Baroness, Lady Noakes, has sought to address one concern I raised about a similar amendment that she put forward in Committee. I was concerned that a sunset provision in this clause might mean that guarantee schemes might never get off the ground. This new amendment seeks to address that point, and for that I express my gratitude.
	However, I still have concerns about how the amendment would operate in practice. As I understand it, the intention is to ensure that obligations entered into before the sunset period expires can be met afterwards, so that schemes initiated before the sunset period expires can continue to run. However, what would happen if, after the expiry of the sunset period, the terms of an existing scheme had to be modified? Would the provision cease to apply? That might depend on the nature and scale of the modifications. A careful analysis would be needed to determine whether this was still the "same" obligation entered into before the sunset period expired, or whether the modifications to the scheme were so substantial that the obligation had become a "new" obligation, not covered by the provision. Such an approach could be difficult to operate, and risk preventing sensible and appropriate modifications to existing schemes.
	These are extraordinary times, and the Government must take action, often with unusual haste. I hope, as I am sure does every other Member of the House, that these schemes will not be needed after two years, or will not need to be changed after that time. However, I do not want to promise that at this stage. As I said in Committee, fixing a time limit now would be an unnecessary and unwise hostage to fortune. I hope, therefore, that the noble Baroness, Lady Noakes, will agree to withdraw Amendment 75.

Baroness Ford: My Lords, before the Minister sits down, will he clarify things that he has said that have left me puzzled? I am interested in particular in the idea that the legislation would govern any decision to provide assistance to people with mortgages who are in difficulties. I did not understand that that was required in this legislation. The Department for Communities and Local Government runs the scheme, but I did not think that it was restricted to customers of banks under the special resolution regime who might benefit.
	If I follow the Minister's logic, he also said that we require this clause to provide to banks anything that then assists their customers above and beyond normal business, into which category shared equity schemes, which the Government have been promoting for some time, would also fall. So I gently suggest to him that I really do not follow that logic and I am not sure that, in terms of these examples, his explanation is entirely consistent with current and previous practice.

Lord Myners: My Lords, the legislation simply provides spending authority, which is routine. For the avoidance of doubt, the ability to give benefit to customers of banks is not limited to banks which are in the special resolution regime.

Baroness Noakes: My Lords, the Government have demonstrated that they are going to use these extraordinary times as cover for pretty extraordinary legislation. Earlier today, we debated Clause 75 where the Government are taking unprecedented powers and such unprecedented powers are being taken in other areas of the Bill as well. This too is an unprecedented way of getting cover for the kind of schemes which the Minister has in mind. He has turned a financial stability support clause into one which will support any Secretary of State funnelling any amount of money as long as it goes via a bank or other financial institution.
	The Minister says that he does not see merit in the amendment. From a constitutional position, there is massive merit in the amendment because it restricts the Government to these exceptional emergency powers for a reasonable time. That is a normal thing for Governments to do. We are constantly being faced with the argument that extraordinary times justify all these actions. At some stage that will not work. The Minister's argument about changing a scheme is so minor as not to be worth responding to. If the authority were to run out, obviously the Government would have to take a new scheme and they would not change a scheme to change existing obligations. These are not substantive points, but I accept that the Minister has threatened the House, using the phrase "hostages to fortune", and the emotive language which the Government like to deploy when trying to get their own way in taking huge powers. On this occasion I shall withdraw the amendment, but it is the last time I will withdraw an amendment of this nature on this Bill. I beg leave to withdraw the amendment.
	Amendment 75 withdrawn.
	Amendment 76
	 Moved by Baroness Noakes
	76: Clause 227, page 115, line 27, leave out from first "paid" to end

Baroness Noakes: My Lords, I shall speak also to Amendment 78. The two amendments amend Clause 227(6) and (7) which were introduced in Committee by the Government. Together with new subsection (5), they cover emergency access to the Consolidated Fund when it is too urgent to seek parliamentary approval. My amendments replace the blanket permission in subsection (6) not to reveal the identity of the financial institution which receives urgent financial assistance with a more specific public interest let out which is already contained in subsection (7). Since tabling the amendment, I have noticed that in Amendment 80 the Government have tabled similar subsections to Clause 228 and my amendments should be mirrored there.
	My amendments do not mandate the disclosure of recipients, but they do not allow the emergency procedure to be used as a cover for anonymity when the public interest is not at stake. It seems to me that it is only the public interest that the Government can pray in aid for nondisclosure. I hope that the Minister will see that as reasonable. I beg to move.

Lord Turnbull: My Lords, there is a general principle about which I am unclear. We seem to be in a position where the amount of expenditure will be disclosed but the recipient will not. We have to ask ourselves whether that should always be the case. If a bank in trouble is assisted by the authorities, but in the mean time goes, for example, to find people who can raise capital and it puts the deficit in its capital to rights and repays the assistance, one could take the view that that should never be revealed. The fact that someone borrowed from the bank could be revealed but you would never say which bank it was. Alternatively, should we follow the principle that, as soon as it is possible to say that it would not damage the bank or plunge it back into the problem that it had faced originally, its identity should be disclosed?
	I can remember in the early 1990s, when I was at the Treasury, having discussions with the then Governor, the noble Lord, Lord George, and I think the agreement was that when assistance was given by the Bank—they were much smaller banks in those days than we are now talking about—the amount or the identity would not be revealed immediately, but that it would appear in the first annual report of the bank which appeared after six months. However, I cannot remember whether only the amount of the assistance was revealed in the annual report or the name as well. There may be two distinct, subsequent announcements: first, that a scheme has been used and the amount and, secondly—this is what I am seeking guidance on—that a particular bank received help. I suppose the case for doing that would be wanting to judge whether the bank's judgment was correct. The bank may have survived but it may have been rather a foolish thing to have done. Are we entitled to know? Is that as much as Parliament is entitled to know or will we stick, as we have now in Clause 227, and add the requirements in the following clauses on the National Loans Fund that only the amount and the fact of some help is to be revealed?

Lord Blackwell: My Lords, in responding to these amendments, I wonder whether the Minister could clarify the relationship between any report from the Treasury, with or without this amendment, and the disclosure requirements likely to be on the board of the company which receives the assistance. I should have thought that any such assistance would be a market-sensitive fact which would normally have to be disclosed anyway, assuming it is a public listed company. How would any information which the Government put into the public domain relate to the obligations on the directors and the timing difference between those matters?

Lord Myners: My Lords, the purpose of Clause 227 is to give statutory cover for public expenditure in support of various schemes which the Government consider necessary in these extraordinary times. Subsections (1) and (2) are fairly routine parts of the Bill. Clause 227(5) is less ordinary. It allows for direct access to the Consolidated Fund in urgent cases.
	This subsection is unusual, but it is not unprecedented. First, there are already what are called Consolidated Fund standing services provided for in Acts of Parliament. A Consolidated Fund standing service is a service where the money to finance the service can be taken directly from the Consolidated Fund rather than being voted first in supply estimates. There is also provision in some Acts for direct access to the Consolidated Fund to meet government commitments where estimates provision is not available. A good example is the Export and Investment Guarantees Act 1991. But direct access to the Consolidated Fund for expenditure does not mean that it is not subject to proper control, reporting or accounting. No payment may be made out of the Consolidated Fund without the prior approval of the Comptroller and Auditor-General. The amounts paid out will, suitably aggregated, appear in the annual accounts of the Consolidated Fund. There will be National Audit Office scrutiny and the Treasury will have to answer to the Public Accounts Committee in the normal way.
	Turning now to Amendments 76 and 78, subsections (6) and (7) of Clause 227 provide for reporting of expenditure to which the special provisions in subsection (5) apply. Your Lordships were concerned about aspects of these provisions and I specifically promised the noble Lords, Lord Higgins and Lord Turnbull, that I would look at the issue of anonymity again. We have done so, but we have come to the conclusion that the provisions of Clause 227(6) need to be retained.
	I fully appreciate, not least as a Treasury Minister, that it is not ideal for anyone concerned with public finances to be told that one cannot be informed about what happened with public money. The plain fact is that some of the schemes or arrangements could not operate or would never be taken up by institutions concerned if there was any chance that their identity might become known. There may be cases where knowledge of public support could precipitate the kind of crisis we were seeking to prevent.
	I say to the noble Lord, Lord Turnbull, that I believe that that applies even in cases where, after assistance was received, the amounts were fully repaid. The disclosure of that fact would raise questions about the structure, efficacy, governance, risk controls, and so on, of the recipient institution. There may also be instances where it is essential to keep payments under a guarantee or similar commitment confidential. As well as a need to be able to delay or dispense with a report on grounds of public interest, we must be able to assure participants in some schemes that we can keep confidential their participation and any payments we have made under any guarantees or similar financial commitments entered into for their benefit.
	The noble Lord, Lord Turnbull, also asked about disclosure in the Bank's annual report. To the best of my recollection, the Bank's annual report now discloses that no financial assistance has been provided since a certain date. Obviously, that may well change in the Bank's next annual report. I am speaking here on the basis of my recollection as a member of the Audit Committee of the Court of the Bank of England, but my experience is somewhat out of date, and I was not sitting in court when the last set of annual reports and accounts were approved, because I had taken leave of absence. If I am incorrect in my explanation, I will write to the noble Lord.
	The noble Lord, Lord Blackwell, asked about the obligations that would fall on the directors of a bank if the bank was a public company under listing regimes. I would rather give him a very precise and correct answer, so rather than anticipate the answer, which I am tempted to do, I prefer to take guidance and will write to the noble Lord and copy my reply to others who have spoken to the amendment. I fully accept the point that he makes: if there were an obligation to disclose under the listing requirement, part of the argument in favour of anonymity here would be undermined for public companies.
	To close, we have, therefore, to keep the anonymity provisions in Clause 227(6), and I am afraid that the Government cannot accept Amendments 76 and 78 , tabled by the noble Baroness, Lady Noakes. I hope that in the light of that explanation she will feel able to withdraw the amendment.

Baroness Noakes: My Lords, these are difficult issues. Obviously, there is a great desire for transparency and public knowledge but, on the other hand, I recognise that there are necessary issues of confidentiality. There has been some discussion of what was done with the Bank of England's accounts. From my recollection, since the disclosure rules for the Bank of England were changed, there had not, until last year, been an issue of new financial assistance. You have to go back quite a long way to find the last one, although that, too, is from memory, going back even further than the Minister's memory.
	These are difficult issues, and I shall not press my amendment. I do not say that I am convinced by the Minister's response, but I concede that there is a case to be made. I beg leave to withdraw the amendment.
	Amendment 76 withdrawn.
	Amendments 77 to 79 not moved.
	Clause 228 : National Loans Fund
	Amendment 80
	 Moved by Lord Davies of Oldham
	80: Clause 228, page 115, line 43, at end insert—
	"(6) Where money is paid in reliance on subsection (1) the Treasury shall as soon as is reasonably practicable lay a report before Parliament specifying the amount paid (but not the identity of the institution to or in respect of which it is paid).
	(7) If the Treasury think it necessary on public interest grounds, they may delay or dispense with a report under subsection (6)."

Lord Davies of Oldham: My Lords, the amendment concerns transparency in payments from the National Loans Fund. Transparency about some of the powers provided in the clauses has been the subject of a great deal of debate both in Committee and today. We undertook in Committee to look at points made and reflect further. The amendment is our response to those Committee debates.
	I shall have a little more to say on the subject of transparency in general when we come to Amendment 81, and why the Government believe it to be unnecessary, but let me concentrate first on the merits of the government amendment.
	It is important to understand that the financial provisions in Clauses 227 and 228 fulfil a largely routine function in providing statutory cover for public expenditure. One consequence is that they automatically attract the standard arrangements for control, reporting and accounting of public expenditure.
	Clause 227 attracts those mechanisms that apply to expenditure from the Consolidated Fund, whether voted in Estimates or taken directly as a standing service. Clause 228 automatically attracts the normal machinery for the control, reporting and accounting for payments from the National Loans Fund. For example, no expenditure on loans may be paid out of the National Loans Fund without the approval of the Comptroller and Auditor-General under the National Loans Act 1968. All loans from the National Loans Fund are included in the annual accounts of the fund.
	The National Loans Fund can only make loans, so Clause 228 could never replace the emergency provisions in Clause 227(5), but it serves a similar purpose in that loans can also be made from Votes—provided, of course, that the necessary Estimates cover has been obtained, or that the resources can be taken from the Contingencies Fund.
	So the Government felt, on reflection, that the same kind of reporting arrangements as apply for the urgent payments under Clause 227(5) should be made for individual emergency loans under Clause 228. Amendment 80 does that with the same kind of anonymity and public interest conditions as Clauses 227(6) and (7) provide.
	There are already in place well-established arrangements for accounting and reporting which will cope with most of what may happen under Clauses 227 and 228 in the normal way. The additional reporting arrangements that the Government now propose will ensure that emergency payments from the National Loans Fund will have the same reporting arrangements as those that Clause 227 provides for emergency payments, direct from the Consolidated Fund.
	Accordingly, I beg to move.
	Amendment 80 agreed.
	Amendment 81
	 Moved by Baroness Noakes
	81: After Clause 228, insert the following new Clause—
	"Transparency: financial assistance
	(1) The Treasury shall prepare and lay before each House of Parliament a quarterly report in respect of—
	(a) financial assistance paid out under section 227(1);
	(b) loans made under section 226;
	(c) guarantees, indemnities or similar arrangements which may result in amounts being paid out under section 227(1).
	(2) The Treasury shall ensure that the report contains sufficient detail to enable Parliament to understand the actual and potential commitment of public money to financial assistance and the Treasury may summarise the individual items which fall to be disclosed in a report in whatever way they consider appropriate in order to assist Parliament in that regard.
	(3) If the Treasury consider that certain information should not be disclosed in a report on public interest grounds, a report may omit that information until such time as the Treasury consider that the public interest is no longer affected."

Baroness Noakes: My Lords, Amendment 81, in my name and that of my the noble Lord, Lord Turnbull, introduces a new clause after Clause 228 which, put simply, provides for transparency and reporting to Parliament about the uses of both Clauses 227 and 228.
	We debated in Committee a longer and more detailed version of the amendment, and the Minister said that he would take the issue away to look at it. All he has produced is a little bit of extra reporting set out in Amendment 80, to which we have just agreed. I declined to group the amendment with Amendment 80, because they operate at quite different levels and I did not want the House to think that they were in some sense the same approach to transparency, because they are not.
	We noted in Committee that one thing that is not well reported to Parliament is commitments as well as cash. My amendment seeks to capture commitments as well as cash outflows. The latest schemes introduced by the Government to stave off the recession have typically involved guarantees rather than cash. Where and how can Parliament keep an eye on how much contingent liability is being racked up for the future? The answer is probably the annual resource accounts of the Treasury. As the recent report of the Treasury Select Committee in another place noted, the information that is contained in those accounts is painfully inadequate, and of course is not timely.
	My amendment calls for a quarterly report to Parliament, so that Parliament can track the build-up of both cash and commitments under the various financial assistance schemes that now exist under the very wide powers that together Clauses 227 and 228 comprise. In Committee, the Minister queried whether it was appropriate for the Treasury to report on other departments' financial assistance. That is not a real point. The powers can only be used with the consent of the Treasury, and of course, we are entitled to look to the Treasury to pull together relevant pan-government financial analysis. That is one of the things the Treasury is there for. I should also note that my amendment has the usual let-out on public interest grounds for as long as the public interest may be affected, so there should be no question of having to disclosed information that is of a sensitive nature.
	In sum, this is a perfectly reasonable amendment that has the needs of parliamentary accountability at its heart. I beg to move.

Lord Turnbull: My Lords, the noble Baroness, Lady Noakes, has justified this amendment, the primary purpose being to ensure proper parliamentary accountability of the way the powers provided in this Bill are exercised. It also provides, as she has said, a pragmatic solution to the issue of whether market intervention should be kept confidential—that is, that information may be withheld, but should be released once there is no danger of exacerbating the problem that the authorities are trying to solve.
	In addition to the parliamentary requirement, there is a more general requirement. The Treasury and the Bank are using a wide variety of techniques to counter the current problems. There is a special liquidity scheme, equity stakes in banks, preference shares, guarantees of inter-bank lending, risk sharing for lending into companies, refinancing of mortgages, lending which substitutes for bank lending, insurance of so-called toxic assets and, possibly in the future, purchase of such assets.
	Different interventions are being injected at different points in the process. Some may be in money markets, some direct into banks and some towards their credit-starved customers. Some assistance may be provided under the powers of this Bill, some under other powers, some under the Appropriation Act, and as the previous two clauses show, there are different channels through which they can be financed. One's head spins in the face of all this.
	I think there is a strong need for a regular report which would take the provisions of this clause as its kernel, but would actually go beyond it. It would bring together all the different ways in which the Government and the Bank are responding to the financial crisis. It should identify each scheme under a consistent nomenclature; when it was announced; how much has been committed; how much has been drawn; what guarantees have been offered; any losses crystallised to date; the powers used; and the source of the funding.
	Above all, it must be clear and simple. Regrettably, the Pre-Budget Report and the Budget documents have become virtually unusable. They are rather like those cumulation songs, such as the "Twelve Days of Christmas", or "Ten Green Bottles", when not only are this year's actions reported, but all the previous years' actions are repeated until the document becomes ever bigger. The latest version should simply be compared with those produced 10 years ago.
	This amendment provides the foundation of such a report, and that is why I, too, am happy to support it.

Lord Newby: My Lords, I support the noble Lords who have spoken in favour of this amendment. One of the problems about the situation we are in now, which the Government's provisions do not solve, is that there is a whole raft of statements, a whole raft of commitments, and it is very difficult to bring them all together and get a sense of what they are at any one time, and also, how they are growing. The great advantage of this amendment is that it produces a series so you can see from one quarter to the next how the situation is changing. In terms of getting a sense of the overall level of government commitment, it is far superior to the provisions that the Government have placed so far in the Bill.

Viscount Eccles: My Lords, in my copy of the amendments, subsection (1)(b) states,
	"loans made under section 226;"
	I think that must be a misprint for "228".

Lord Davies of Oldham: My Lords, I am happy to say that it is not my amendment, so someone else must address it. Just for once, I leave the noble Viscount's keen scrutiny of the Bill to the tender mercies of the noble Baroness when she gets her chance to reply.
	We have already said a lot on the matter of transparency in relation to those parts of the Bill which provide for financial assistance to be made, but I think I need to spell out why the Government are opposed to Amendment 81.
	We live in extraordinary times and this Bill is intended to deal with the consequences of extraordinary events. Some of the powers in the Bill are, therefore, themselves rather extraordinary. We have had attention drawn to that during the course of the debate this afternoon. The House is of course concerned about the scope of these powers and about the provision for parliamentary control and oversight of their use. The Government would have expected nothing less and we appreciate the importance of responding to these concerns.
	However, not every power or provision in the Bill is extraordinary. Some are quite ordinary—even routine—and that is true of parts of Clauses 227 and 228, as we have discussed at length in the preceding debates. For example, Clause 227(1) is essentially a standard provision included in all Bills that might involve public expenditure. It gives the proper coverage for the use of the annual Supply Estimates to provide the funds for government departments to carry out their programmes. This provision is to be found in countless Acts of Parliament already on the statute book. And Clause 227(1) attracts all the normal apparatus of Parliamentary control, reporting and accountability for the expenditure concerned.
	No money, therefore, will be spent on any of the schemes covered by subsection (1)—or for that matter subsection (2)—unless the necessary Estimates have been approved in the normal way by the House of Commons and incorporated in an Appropriation Act or a Consolidated Fund Act, or unless funds have been taken from the Contingencies Fund in line with other long-standing arrangements. Or—and this is where a reference to some non-routine provisions must be made—it has been necessary to use the provisions in subsection (5), which provide the Treasury with direct access to the Consolidated Fund in cases of urgency.
	But there is more. No funds can be issued from the Consolidated Fund, even after an Estimate has been passed, without the approval of the Comptroller and Auditor-General under the Exchequer and Audit Departments Act 1866.
	Where Estimates are involved, of course, expenditure will always be fully within normal departmental accounting systems. It will be included in departmental resource accounts and subject to National Audit Office scrutiny and audit. The schemes will be discussed in departmental reports, and scrutinised by departmental select committees and the Public Accounts Committee in another place. All of this apparatus will be attracted routinely and automatically by the departmental spending decisions, by the Estimates and by the statutory cover for those Estimates which Clause 227(1) and (2) provide.
	As I said a few minutes ago, Clause 228 automatically attracts the normal machinery of parliamentary accountability. The Government do not feel, therefore, that there is any need for additional reporting of the expenditure covered by these clauses which the amendment proposes. Subsection (1)(c) of the proposed new clause opens up the issue of guarantees or any other form of contingent liability, which do not, as I explained in Committee, give rise to any expenditure when they are given. They give rise to expenditure only when they are called. So the normal mechanisms for reporting expenditure, which I have just described, do not bite on guarantees when they are given.
	This does not mean that they go unreported. Contingent liabilities that are not entered into in the normal course of business are normally reported to Parliament by means of a departmental minute when the commitment is entered into. Of course, some guarantees have to be kept confidential; the established practice is that these are reported in confidence to the chairmen of the Public Accounts Committee and the departmental Select Committee. Contingent liabilities are also reported in the annual departmental resource accounts. There is, of course, full National Audit Office scrutiny and audit in the normal way.
	I can appreciate why the noble Baroness and the noble Lord, Lord Turnbull, see a need for additional regular reporting of guarantees or similar commitments entered into under Clause 227(1), but this would not, in practice, add much to the arrangements that I have just described and which would continue to apply. I am afraid that this would also be impracticable, when at least some of the guarantees might be large and might have to be kept confidential. The problem is, of course, that if some commitments are kept confidential while others are not, there will inevitably be a mismatch between some published total and the sum of the numbers in the column above, which it would be hard to conceal. There is no way round this problem.
	I hope that I have persuaded the House that there are already in place well established arrangements for accounting and reporting which will cope with most of what may happen under Clauses 227 and 228 in the normal way, and that the additional reporting arrangements in Clause 227(6) and Clause 227(7), which are now repeated in Clause 228, are suitable for the more unusual things that may happen under these clauses. I noted the strength with which the noble Baroness presented her amendment. I hope that, on reflection, she will accept that the Government have considered these issues and she will feel able to safely withdraw Amendment 81.

Baroness Noakes: My Lords, I thank all noble Lords who have spoken. I agree with the noble Lord, Lord Turnbull, that it is important to try to bring together all the schemes that are being used to provide assistance or support in various ways. The amendment deals with the money that comes from Parliament; it does not necessarily capture absolutely everything that goes through the Bank of England directly, but it covers the majority of it. I further agree with the noble Lord on the content of the PBR and the Budget, but we will have that debate another day.
	The noble Lord, Lord Newby, is right that it is important to look at a series of reports to see a build-up over time. I think that I thank my noble friend Lord Eccles for his contribution on the typing error that has been made on the Marshalled List. I am sure that it is not a major impediment.
	The Minister tried to portray the provisions of Clauses 227 and 228 as rather routine. I am sure that much is routine in their structure, although not the latter's subsections. The issue is that the content is not routine. The content endorses both the payment and the commitment of very large sums of money. We learnt in Committee that this clause is being used to frank the £37 billion already committed via bank rescue 1. This clause will provide the backing for anything that comes out of bank rescue 2, including the guarantees to the Bank of England. This clause will provide the cover for the various guarantee schemes that the noble Lord, Lord Mandelson, has been announcing, as well as other schemes. We are talking about major sums of public money.
	The Minister explained about estimates and the Comptroller and Auditor-General, none of which is in dispute. The issue is how we pull information together so that Parliament can, over time, track the build-up of not only the money that has been spent but, more important, the money that has been committed. These are exceptional times and it is right that Parliament should have an exceptional degree of scrutiny of what is being done under the authority provided by the Bill. Parliament should not have to wait for the normal production of annual accounts or the laying of Treasury minutes. The information should be pulled together and explained. This is a very important issue. I do not believe that any of the Government's objections have real substance. I beg leave to test the opinion of the House.

On Question, whether the said amendment be agreed to (Division on Amendment 81)
	Their Lordships divided: Contents 166; Not-Contents 131.

Resolved in the affirmative; Amendment 81 agreed.
	Clause 230 : Definition
	Amendment 82
	 Moved by Lord Myners
	82: Clause 230, page 116, line 25, leave out paragraph (a) and insert—
	"(a) provide that a specified class of institution, which has a permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity, is to be treated as an investment bank for the purpose of this group of sections;
	(aa) provide that a specified class of institution is not to be treated as an investment bank for the purpose of this group of sections;"

Lord Myners: My Lords, as I said yesterday, there are a number of areas in relation to this Bill where further consideration would be helpful before the issues are debated again. One such area is the Government's provisions for investment bank insolvency. While these provisions have been accepted by the House, there are a number of areas where the Government continue to work to refine the proposals. It has therefore been agreed through the usual channels that the noble Baroness, Lady Noakes, and I will not move Amendments 82, 83 and 84, relating to Clauses 230 and 233, today. We will return to these matters at Third Reading.

Baroness Noakes: My Lords, I am grateful to the Minister for that statement and I look forward to further discussions before Third Reading.

Lord Goodhart: My Lords, I shall speak as chairman of the Delegated Powers Committee, which has expressed strong views on this matter. The Government's proposals for giving themselves almost unlimited powers to rewrite the whole law of insolvency in relation to investment banks reminds me very much of the words of King Lear in his madness:
	"I will do such things,—
	What they are yet I know not,—but they shall beThe terrors of the earth".
	It certainly seemed to us that Amendment 84 would create a proper balance between the need to act urgently in a crisis and the need for Parliament to give full scrutiny to legislation of serious importance. I am very pleased to know that discussions will continue on this. I hope that they will come to a satisfactory conclusion.

Lord Myners: I beg leave to withdraw the amendment.
	Amendment 82 withdrawn.
	Amendment 83 not moved.
	Clause 233 : Regulations: procedure
	Amendment 84 not moved.
	Clause 235: UK financial stability
	Amendment 85
	 Moved by Baroness Noakes
	85: Clause 235, page 119, line 20, after "be" insert ", in co-operation with the Treasury and the FSA,"

Baroness Noakes: My Lords, when the noble Lord, Lord Turnbull, and I reflected on the somewhat unsatisfactory debates on the new financial stability objective and the Financial Stability Committee, we broadly decided that, while we did not much like the Government's proposals, we would go for a minimalist solution of at least recognising that the Bank's objective was one that could be delivered only in conjunction with the other tripartite actors. The Government have reached a similar minimalist conclusion and tabled Amendment 86, which is in a similar form. I prefer the formulation that the noble Lord, Lord Turnbull, and I came up with, which uses the words "in co-operation with", rather than the words,
	"shall aim to work with",
	in the Minister's amendment. However, I shall listen with care to what the Minister has to say about his amendment before deciding what to do with mine.
	The amendments in this group, while useful, do not go to the heart of the concerns that we raised about the new arrangements within the Bank of England. I shall not argue them in detail, because many will emerge from the next group of amendments in the name of the noble Lord, Lord Eatwell. To summarise, there are issues about the Financial Stability Committee not having the right internal or external people on it and there are issues about it ignoring the FSA. It is working to an objective about which there may be a lack of clarity. There may be a need to appoint members to court to fill the Financial Stability Committee, thus unbalancing court. The terms of reference of the committee are a ragbag of overlapping functions and there is no transparency about the committee's working.
	I know that the Governor of the Bank of England wants no change to the proposals in the Bill. The Government did not need to put him up to writing formally to the Minister to reinforce that, as it was already well known. I do not believe that the arrangements will work well in practice and I predict that we may well need another bit of legislation to unwind some of this 2009 experiment. However, as the Government have at least accepted the thrust of Amendment 85, we are prepared to listen to their version. I beg to move.

Lord Turnbull: My Lords, I regret that I was unable to attend the latter part of the Committee stage, when what is now Clause 235 was debated. I congratulate those who stayed to the bitter end at gone two o'clock in the morning on their stamina. Had I been present, I would have supported the concerns expressed by the noble Baroness, Lady Noakes, and the noble Lord, Lord Eatwell. The principal shortcoming of the clause was that it almost entirely overlooked the fact that we have a tripartite structure for regulation and crisis management. The clause was entirely introspective, making provision for a change in the structure within the Bank but making no reference to the other players. Hence the amendment, which would insert the words,
	"in co-operation with the Treasury and the FSA".
	I am pleased to see that the Government have come up with a similar wording. We can debate whether our wording is better than theirs in due course.
	I know that some people—indeed, some people of great eminence—perhaps driven more by nostalgia than by evidence, long to return to a world where the whole system revolved around the Bank. This Bill, in my view correctly, works on the premise that the tripartite structure should be retained but strengthened. For example, earlier clauses sought to define the areas of responsibility in which each player takes the lead. The old system did not work in the modern world, where threats to financial stability come from insurance companies such as AIG, which I believe is still the largest recipient of assistance anywhere in the world to date, from investment banks such as Lehman Brothers and, in the crisis in 1998, from hedge funds such as Long-Term Capital Management.
	If the tripartite system is to be retained, it makes sense for the Government to show their commitment to making it work well and to entrench some wording that places a duty on each of the players to collaborate fully. I, too, will wait to hear what the Minister has to say before deciding whether to support the Government's wording. However, I think that we are both seeking the same outcome.

Lord Myners: My Lords, I assure the House that I have taken seriously the concerns expressed last week by several noble Lords about the interaction between the members of the tripartite in the area of financial stability. Before turning to the amendments in this group, I emphasise that the Government believe, as I have previously said, that the tripartite system remains fundamentally sound. The Treasury, the Bank of England and the Financial Services Authority all have roles to play in protecting financial stability, but these roles are different, defined and distinct. The tripartite Memorandum of Understanding shows how each must work with the others as appropriate.
	The Government, with this Banking Bill, are taking steps to further support and strengthen the tripartite system, extending the powers and responsibilities of the Treasury, the Bank of England and the FSA. We are responding in this way to the call from the noble Lord, Lord Turnbull, to evidence our commitment to making sure that the tripartite system works. These steps are being taken in line with each institution's current mandate and responsibilities, to avoid overlap, to ensure that at each point it is clear which institution is in the lead and to enable each body to rely on and build on its existing expertise and experience. This must surely be the right approach to take, rather than creating overlap, duplication or uncertainty over the extent of an institution's authority.
	For example, in establishing the special resolution regime, the Bill sets out resolution processes whereby each of the tripartite authorities has lead responsibility within those areas in which its expertise and authority lie. In addition, where appropriate, where one authority has lead responsibility, the Bill also requires appropriate levels of consultation with the other two authorities.
	As I have said in debate on several occasions, I entirely agree that full and effective co-operation between the tripartite authorities is both desirable and necessary. That is why the Memorandum of Understanding establishes mechanisms for the tripartite authorities to communicate and co-ordinate their actions in relation to their joint and individual responsibilities. This is especially important in safeguarding the UK's financial stability, in which, as I said, each of the tripartite authorities has a distinct role to play. It is also vital that they meet regularly to co-ordinate action within their individual spheres of responsibility to address those issues.
	When addressing the financial stability objective in the other place, my honourable friend the Exchequer Secretary referred to the phrase "to contribute to" and said:
	"That phrase reflects the fact that the Bank does not have a duty to ensure financial stability on its own, because that would be impossible. That responsibility is shared nationally with the FSA and HM Treasury and internationally with the European Union and other international bodies, which all have a major role to play, alongside market participants themselves".—[Official Report, Commons, 30/10/08; col. 240.]
	It is clear that the phrase "to contribute to" implies that the UK's financial stability is not the sole responsibility of the Bank of England.
	On reflection, however, and having considered the concerns raised by noble Lords on this point in debate last week, we have decided to refer explicitly in the Bill to the fact that the Bank's financial stability objective will be pursued in collaboration with other relevant bodies, including the other tripartite authorities. That is why Amendment 86, which appears in my name, inserts wording to the effect that the Bank should aim to work with the Treasury, the FSA and other relevant bodies to protect the UK's financial stability. I recognise that Amendment 85, in the names of the noble Baroness, Lady Noakes, and the noble Lord, Lord Turnbull, has a similar intention, and I hope that they are content that the Government's amendment has responded to their concerns.

Baroness Noakes: My Lords, I thank the Minister for that explanation and, indeed, for tabling his amendment. I continue to believe that simply asking the Bank to aim to work with the Treasury and the FSA is setting rather a low hurdle, but at this stage of the game one accepts half loaves and does not hold out for the full loaf. I beg leave to withdraw the amendment.
	Amendment 85 withdrawn.
	Amendment 86
	 Moved by Lord Myners
	86: Clause 235, page 119, line 22, at end insert—
	"(1A) In pursuing the Financial Stability Objective the Bank shall aim to work with other relevant bodies (including the Treasury and the Financial Services Authority)."
	Amendment 86 agreed.
	Amendment 87
	 Moved by Lord Eatwell
	87: Clause 235, page 119, line 27, after "a" insert "joint"

Lord Eatwell: My Lords, there is a slight oddity in the grouping in that we are going to have the same debate all over again, but with the more sweeping proposals that I tabled first in Committee and have retabled on Report because we did not get satisfactory answers in Committee to the issues that were raised.
	At the centre of our concerns are the operations of the tripartite arrangements in securing financial stability. One of the most peculiar aspects of the situation before us is that the tripartite committee has no statutory foundation, yet extraordinarily the Financial Stability Committee will be in primary legislation when it is just a sub-committee of the Court of the Bank of England. It is very strange that we need to have primary legislation for a sub-committee of the court but do not require it to establish the position of the tripartite committee, which the Minister has just argued is so enormously important.
	I very much agree with the Minister that the tripartite arrangement is very important for financial stability and the complex interactions of macroeconomic, institutional and microeconomic variables, all of which can feed into problems of financial stability. We know from the evidence that we have that the tripartite arrangements simply did not work at the commencement of the current financial turmoil. Indeed, those involved admitted that they did not work at all well.
	Lessons have been learnt, but I am afraid that I am still under the considerable impression that they are still not working effectively. In the past, the Bank of England had the important role during financial crises of co-ordinating the response of banks and other financial institutions to the crises. It was a meeting of the institutional investors, hosted by the Bank of England in the early 1970s, that called the bottom of the stock market crash. Today, such co-ordination is not evident and indeed would be difficult to achieve, since the Bank of England no longer has the relationship with so many of the financial institutions that it used to have. One would therefore expect the Bank of England and the FSA to work together to achieve that sort of co-ordination. However, Mr Peter Sands, the chief executive of Standard Chartered, stated in December:
	"The policymakers need to engage with the providers of capital to the banking system, rather than just talking to the banks, because ultimately you need a convergence in expectations".
	In other words, Mr Sands, who is running one of the most important banks in the country, is telling us that there is no co-ordinating activity, which was so important in the past. It is not clear that the difficulties and problems associated with the tripartite system have as yet been effectively overcome.
	My amendment in Committee attempted to achieve a statutory basis for the tripartite arrangements. That is why I embodied the FSA and a number of independent persons in the stability committee. I am very disappointed that the Government did not even consider whether there should be independent persons on the committee. The independent members of the Monetary Policy Committee have made an enormously important contribution to the work of that committee, so why cannot we also have independent members on the stability committee?
	If the Government are not willing to accept an amendment in this form, I suggest that they abandon the Financial Stability Committee altogether. Over the next several months, we know, because the Chancellor has told us, that there will be significant new legislation on financial regulation and that that legislation is likely to require new institutions to make it effective. Those new institutions will have to be tripartite institutions in some sense and the committee will become an irrelevance. Yet here it is in primary legislation. We really do not need it. It would be much better to wait for the development of regulatory reform and then put into place the institutional structures that will be more appropriate for that reform.
	It is clear, for example, that in any system of regulatory reform that is reacting to current financial turmoil there must some form of liquidity regulation. The banks must have some liquidity management, which means managing their liability side rather than just their asset side, which has been the regulatory structure until now. How will the Bank of England's Financial Stability Committee do that when all the information about liquidity, especially about the liability structure of the banks and other institutions, is in the FSA? They will have to work closely together, so there will necessarily be some institutional framework in order for them to do so. It would be much better to devise that framework free of the Financial Stability Committee, which is simply a sub-committee of the Court of the Bank of England and cannot have a primary role in dealing with financial stability as it confronts the British economy in the complex financial structures that we have today.
	In these circumstances, and in all humility, I advise the Government either to accept my amendment—that is probably not terribly humble—or to abandon the Financial Stability Committee altogether so that, as we move into a new era of regulatory reform, we can design the institutions that are appropriate for the effective management of financial stability in the UK. I beg to move.

Lord Turnbull: My Lords, the other issue that I would have raised on what was Clause 228, now Clause 235, was whether creating a Financial Stability Committee within the Bank, along the lines currently proposed, was the best way forward. I accept that the starting premise of this is correct: the Bank would benefit from what might be called ventilation, or exposure to a greater degree of outside thinking. It is ironic that at a time when this is more necessary than ever, the Bank's senior leadership will shortly, for the first time since 1997, be made up entirely of insiders, defined as those who have been with the Bank for more than 10 years. While correctly identifying the problem, I wonder whether the proposed solution is indeed the best available; that is, to take four members of the court and put them into a committee chaired by the governor, assisted by the two deputy governors. Oddly, the executive member responsible for markets would not be a full member. I was not convinced by the Minister's explanation that this was a sufficient gene pool—the phrase that was used—to assemble the experts necessary. Some of them, who would be excellent in the role of experts, would not necessarily want to work, in effect, as the non-executive directors of the Bank, with the much wider range of responsibilities that that carries.
	I am also puzzled as to why, if a committee of this kind is needed, it could not have been set up months ago without primary legislation. As the noble Lord, Lord Eatwell, has pointed out, it is inevitable that the whole architecture of regulation will be revisited, not only in the UK but internationally. I, too, wonder whether it makes sense to commit ourselves to legislate on something that will probably have only a short life and whether we could proceed by non-statutory means. I expect that we will probably return to what I would much prefer—a body that acts as a forum to oversee and guide not only the individual players in the system, but the whole tripartite system itself.
	This Bill provides for a Banking Liaison Panel to help the Treasury and a Financial Stability Committee to help the Bank, while the FSA already has various practitioner panels. What is missing is something to bring this all together at the tripartite level and sort out the conflicts and trade-offs that the different parties will inevitably bring. For example, the FSA is currently encouraging banks to husband their capital with great care and build it up, while the Treasury wants to encourage banks to commit more of that to increasing their lending. That is precisely the kind of issue that something working at the tripartite level could help to sort out. The Bill currently addresses a particular issue but misses an opportunity to look at something that would have a greater purpose. We will have to wait, but time will probably tell that the noble Lord, Lord Eatwell, and I are right.

Lord Northbrook: My Lords, I support the noble Lord, Lord Eatwell, and his amendments to strengthen the Financial Stability Committee. I take his point about the likely short life of the committee and how it might benefit from the extra membership, particularly as the Minister has stressed the importance of the tripartite regime. To reiterate an old chestnut of mine, I am sorry that the noble Lord, Lord Turner, cannot be here to put in a word for this as well.

Lord Newby: My Lords, I supported these amendments and the noble Lord, Lord Eatwell, in Committee and I certainly support the principle behind the amendments. Since the Committee stage, we have received a long explanatory note from the Governor of the Bank of England as to why this committee would be completely impossible. I fear that there are real shades of "Yes Minister" in it. It says that,
	"implementation of the FS strategy ... has implications for the Bank's balance sheet and risk and control environment",
	and that it cannot be left,
	"to a Committee that is disconnected from the Court of Directors",
	to take decisions in that area. Instead, he suggests that it is all fine, that the Bank works happily within the tripartite framework and that he would be happy to have this stated in the Bill. I assume that this is why we have Amendment 86, which we have just debated. Again, this is a wonderfully drafted amendment. It is the absolute minimum that you could conceivably say while saying anything at all. It covers the fact that the Bank will work with the other relevant bodies, including the Treasury and the FSA, but qualifies it, lest it be thought that the Bank should strive too hard to work with them, by saying that it shall "aim" to work with them. The truth is that the governor says that they are happily working together anyway, yet the Bill now says that the Bank will try its best to see whether it can work with these bodies. The implication of both the amendment and the document from the governor is that the Bank is extremely grand, and will work with all the people who want to be involved if it has to, but it is the Bank that really matters.
	The entire thrust of what the noble Lord, Lord Eatwell, has been saying, and which I support, is that the FSA and the Bank have equal roles in maintaining financial stability, given that financial stability depends very much, as we have seen recently, not on some general collective financial situation, but the position in individual significant financial institutions where the FSA, by common consent, is in a much better position than the Bank to know exactly what is going on. Given that the Government clearly will not accept these amendments, I follow the logic of the noble Lord, Lord Eatwell. It would be better not to have all this stuff about one sub-committee of the Bank in the Bill because it gives it an inflated importance and creates a misleading impression of how the tripartite system both is intended to work and will work.

Lord Stewartby: My Lords, I add my voice to the sceptical comments from all parts of the House. When I first went through the Bill, this was the part which I found least convincing. We should be grateful to the noble Lord, Lord Eatwell, in particular for setting out so clearly the arguments for replacing the Financial Stability Committee, as defined already, with something that has a better chance of working in practice, and what legislative form that might take. I therefore ask the Government to consider very seriously the points that have been made in this short debate. I do not believe that a group of people with the varied experience of those who have contributed to this debate is likely to go on some blind journey without any sort of conviction that there is a sensible destination. It may be that the solution would be to withdraw these clauses from the Bill and wait for the large regulatory Bill which will come before too long. That would be a sensible way to deal with it, so I support the noble Lord, Lord Eatwell, without necessarily agreeing with all the details that he has put forward.

Baroness Noakes: My Lords, I have argued throughout that the Bill does not reflect the tripartite authorities and how they work together; instead, it identifies little bits of things for them to do at various points and fails to address the whole, which I believe it should. Like my noble friend Lord Stewartby and other noble Lords who have spoken, I do not necessarily sign up to every detail of the proposals of the noble Lord, Lord Eatwell. They are better than what is in the Bill, but I think the solution would be to take out financial stability. We can leave in the financial objective with its weak little override about aiming to work with the others. As has already been pointed out, if it is helpful to the governor to have a financial stability committee made up of whomever he chooses to have advising him, and it does not require primary legislation to do so, that can be arranged. However, if other architecture changes to legislation are needed in due course to meet whatever global consideration there is in response to the current financial crisis, that would be a perfectly appropriate time to do this. Many things do not need to be legislated for, and since we are not even legislating for the tripartite authorities, it is extraordinary that we are legislating for a sub-committee. I support the noble Lord, Lord Eatwell.

Lord Myners: My Lords, I am grateful to my noble friend Lord Eatwell for putting before the House a considered set of proposals in which he has clearly invested a great deal of time and thought. His amendments form a coherent package with the purpose of making the Financial Stability Committee into a joint committee of the Bank and the FSA, with further Treasury membership. I respectfully maintain, however, that the model of a joint committee that my noble friend suggests, while being internally coherent, would have an entirely different function from the role which the Government intend the Financial Stability Committee to play. My noble friend has given a strong account of his proposed model. If the House will allow, I will take this opportunity to explain again why the Government are setting up the Financial Stability Committee and why I believe the model set out in the Bill is the correct one.
	I should first mention that the Governor of the Bank of England wrote to me towards the end of last week. I can assure noble Lords that the governor is a man of such independence that the idea that he would be directed by a Minister to write a letter is clearly both outrageous and implausible. He has set out his thoughts on our extensive discussions about these issues and I shall refer to some of his comments in due course. The noble Baroness, Lady Noakes, my noble friend Lord Eatwell and the noble Lord, Lord Newby, have received copies of the letter, and I have arranged for a further copy to be placed in the Library of the House.
	In Committee, the noble Baroness, Lady Noakes, and the noble Lord, Lord Higgins, asked whether it was necessary to establish the Financial Stability Committee in primary legislation, a question which has again been asked today by my noble friend Lord Eatwell, the noble Lord, Lord Newby, and the noble Baroness, Lady Noakes. The answer, of course, is no. The court already has the power to set up new committees, whether they consist of internal committees such as the already existing Financial Stability Board or sub-committees of the court such as the Transactions Committee.
	I take this opportunity to mention that the noble Lord, Lord Higgins, has expressed his regret that he cannot be in his place for this debate on Report. I should like to point out to noble Lords that his absence arises because he is attending a ceremony in The Hague to mark the distinguished services of Lady Higgins, the excellent Judge Rosalyn Higgins, as President of the International Court of Justice, which she has served with enormous distinction. I am sure that all Members of the House will send our best wishes and congratulations.

Noble Lords: Hear, hear!

Lord Myners: My Lords, I return to the debate. A question put by the noble Lord, Lord Higgins, goes to the heart of what the Government are aiming to achieve with this clause. It is clear that the Bank does not need a statutory objective in order to ensure financial stability as one of its key objectives. I draw the attention of noble Lords to the Bank of England's annual report 2008 where on page 1 it states:
	"The Bank of England exists to ensure both monetary and financial stability".
	It lists its two core purposes as "monetary stability" and "financial stability". We can see that in practice, the Bank of England considers its two main objectives to be equally important, but the current legislation does not reflect this. The 1998 Act gives the Bank a statutory objective for monetary policy, but there is no similar statutory description for its objective for financial stability. Therefore, for the avoidance of doubt, we are placing the Bank of England's objective in relation to financial stability on a statutory footing. Does that change in any way how the Bank views its responsibilities regarding financial stability? Of course not, but what it does achieve is to ensure that the Bank's dual responsibilities in relation to monetary policy and financial stability are given a similar level of prominence on the statute book. In the light of the prominence of financial stability in the Bank's current role, and its role in relation to the stabilisation powers contained in the Bill, it is appropriate that Parliament should endorse the arrangements.
	In relation to the stabilisation powers, noble Lords will be aware that the Bill provides the Bank with new powers and levers to protect the financial stability of this country. As lead authority in the special resolution regime, in particular, the Bank will play a crucial role in the resolution of failed banks and will have to take decisions regarding individual institutions, often in extremely fast-moving and pressurised circumstances. To support the governor and the Bank in discharging these enhanced responsibilities, the Government are establishing the Financial Stability Committee. The Bank of England supports this move, as do the Treasury Select Committee in the other place and other interested stakeholders.
	Why are we establishing the committee in statute? The answer is that the Government have placed the FSC on the face of the Bill in order to highlight and set the role that they expect the committee to fulfil; namely, the crucial task of strengthening and underpinning the Bank of England's activities in relation to financial stability. Placing the arrangements on a statutory footing ensures that there is no doubt about the Bank's functions in this important area, and this gives Parliament the opportunity to debate, determine and endorse these arrangements. As the governor explained in his letter,
	"the FSC will provide an effective means of focussing and managing the various strands of the Bank's FS work".
	Last week, several noble Lords asked questions concerning the exact status, composition and role of the Financial Stability Committee. I shall attempt to explain why the Government believe that the model in the Bill is the appropriate one. The first area of debate is when the FSC should be established as a committee of the Bank in a similar way to the MPC: as a sub-committee of the court or in a different structure altogether, for example, as in my noble friend's suggestion of a joint committee of the Bank and the FSA. The Bank's financial stability objective is ultimately the responsibility of the court. It is the court that manages the Bank's affairs, and it is the court that will set the strategy for the Bank to follow in pursuit of its financial stability objective. As the governor emphasises in his letter,
	"implementation of the FS strategy has implications for the Bank's balance sheet, risk and control environment".
	They are integral to the heart of the operations of the Bank and its governance structure. It is therefore vital that the Financial Stability Committee be integrated into the Bank's governance structure in such a way that there is a direct and accountable relationship between the Court of Directors and the committee. For these reasons, I believe it is right for the FSC to be a sub-committee of the court and, as I will highlight when I come to the composition and membership of the FSC, its position as a sub-committee of the court will also allow it to utilise the experience and knowledge of the non-executive directors of the court.
	I now move on to the question of the role and functions of the committee. As I have mentioned before, the Government's aim in establishing the FSC is to provide the Governor of the Bank of England with a source of support and expert advice in discharging the enhanced responsibilities and tools that the Bank will have at its disposal. These new responsibilities are, as noble Lords will be aware, lead responsibility in the SRR and statutory oversight of payment systems in addition to those tools and levers that the Bank can and does already use to protect financial stability.
	In Committee the noble Baroness described the FSC's functions as a ragbag, and she used the term again today. I cannot agree with her. New Section 2B(2)(b) to (e) give the FSC functions in relation to the Bank's role in the SRR and its oversight of inter-bank payment systems. Subsection (2)(f) allows the Court of Directors to delegate further functions to the FSC. As highlighted by the governor in his letter, this will allow the court to give responsibility for some of its existing tools to the FSC. These could include responsibility for decisions relating to the provision of liquidity, decisions which I understand are currently undertaken by another sub-committee of court, namely the transactions committee.
	Finally, subsection (2)(a) of new Section 2B gives the Financial Stability Committee a role in influencing the Bank's financial stability strategy. It seems completely logical to me that a committee that is intended to be the main focus of financial stability expertise within the Bank of England should make recommendations to court on how the Bank aims to fulfil its responsibilities in relation to financial stability. Therefore, the functions of the FSC, as set out in Clause 235, are a coherent package to allow the committee to advise and monitor the practical implementation of financial stability measures.
	Last week, the noble Baroness, Lady Noakes, was of the opinion that the committee cannot advise on and monitor the use of the stabilisation powers at the same time. With respect, I suggest that it would be entirely normal for a committee that includes non-executives to advise an institution or corporation on a specific course of action and later evaluate whether the course of action has been successful. I do not agree that this represents a source of contradiction.
	I envisage the working of the FSC involving executive members of the committee and others providing details of the current situation. This could be an institution in the SRR, or a more general concern about a threat to stability. The committee shall discuss possible options in regard to the situation at hand, with the non-executives contributing their experience and knowledge and the executives providing operational and practical input.
	The committee shall, as a whole, come to a decision on the course of action that it would advise as the most appropriate in the circumstance. However, the Bank's executives will ultimately take the decision on what action the Bank will take, and as such they are accountable to court for their decisions. The Financial Stability Committee will assist court in this regard with its monitoring role. This will be a dynamic process. The committee's expertise and advisory capacity will be enhanced by its role in monitoring the use of the tools.
	I hope this will help illuminate to the House why I believe that it is entirely right for the committee to both advise on and monitor the Bank's action in respect of financial stability. The noble Baroness also asked who the committee would be advising under subsection (2)(b) and (c). It is clear that on a day-to-day basis the FSC will be advising the Bank's executives. It is they who will need to make decisions on how to deal with individual institutions, in what may be fast-moving situations.
	The governor and his executives derive their authority from court. Their responsibilities are delegated from it, and they are ultimately accountable to it. However, both the FSC's work and the executive's action will need to be consistent with the strategy that the Court of Directors agrees as the best strategy for fulfilling the financial stability objective, and it will be the court that holds executives and the committee to account for supporting it in meeting that objective. Ultimately, though, some decisions in relation to financial stability will be of sufficient importance and magnitude that the Court of Directors considers that the decision should be taken by the entire court. So, in some cases, the sub-committee will be advising the court itself. This is a model with which one is familiar in the private corporate sector.
	Moving on to the subject of membership of the committee, I am pleased to note that one thing that my noble friend Lord Eatwell and I agree on is the need to keep the committee relatively small. There has been quite extensive debate, both here and in the other place, on the question of whether the FSC should comprise a fully executive membership, a totally non-executive membership, or some variation between the two extremes. The Government's aim in creating the FSC is to provide the Bank of England with an internal forum where executives and non-executives can come together to discuss financial stability matters. The core executive presence will be balanced with a strong non-executive membership and, if deemed appropriate, co-opted members—non-voting members—bringing their outside expertise and insight to the committee.
	In addition, the Treasury will have a non-voting representative, not only for the reasons that I explained last week, but also, as the governor points out in his letter, because it is,
	"legitimate for the Treasury, as the Bank's shareholder and as the Ministry responsible for public finances, to be aware of discussions that potentially involve significant amounts of public liabilities".
	But let me be clear: I am certainly not saying that attendance at the FSC's meetings should be exclusively confined to these core members.
	The noble Baroness, Lady Noakes, asked last week why we were excluding the senior executive directors from the committee. My answer to her is that nothing in the Bill would stop the FSC from inviting other Bank executives, as may be appropriate, to attend all or part of meetings. There is no limit to the number of additional non-voting members that can also be co-opted to the committee. As I said in Committee, the most senior executive with responsibility for financial stability, the deputy governor, is a full member of the FSC, and I would expect the committee to invite other executives to attend as appropriate.
	Several noble Lords expressed other concerns about the proposed membership, specifically that the FSA is not represented and that there are no fully independent members. The Government agree that the committee should have recourse to whatever external expertise it considers necessary. Again, this is provided for by new Section 2B(4), the power allowing the committee to co-opt other non-voting members. As the Governor says in his letter:
	"It can of course invite the FSA to attend, or anyone else who might help its deliberations, and it will want access to the widest range of information and expertise".
	However, the governor goes on to emphasise that the FSC is, ultimately, part of the Bank. I would like to underline that point. The committee is a sub-committee of the court of the Bank. It is designed to support the Bank in the Bank's enhanced role in protecting financial stability, which includes the management of new policy responsibilities and, in particular, its lead role in the special resolution regime.
	In saying that, I do not mean to suggest that we do not want the tripartite authorities to work together—forfend that be the case, because it is critical that they do work together. I am simply saying that the committee's functions relate to the Bank's functions within the tripartite arrangements, and as such it is appropriate for this to be a Bank committee, not a joint committee. I think that the governor's distinction between internal co-ordination within the Bank and co-ordination between members of the tripartite is very helpful. I entirely agree with him that both are important and necessary, but that we should be careful not to confuse the two mechanisms.
	The letter from the governor emphasises the numerous formal and informal channels through which the tripartite authorities can already work, including the tripartite standing committee. The governor is right to conclude that we do not need a second tripartite standing committee. The function of the Financial Stability Committee is to assist co-ordination within the Bank. I am also glad to endorse a further point that the governor makes: in meeting the financial stability objective, the Bank works within the tripartite framework.
	The tripartite arrangements are set out in a memorandum of understanding. This is sufficient, clear and transparent. The Government's view is that the tripartite working arrangements are better encapsulated in a memorandum of understanding than by being codified in statute, as this provides a necessary degree of flexibility to refine and enhance the arrangements from time to time. Indeed, we have committed to reviewing these arrangements once the provisions of the Bill have been put in place. In any event, as I have outlined, the Financial Stability Committee sits within the Bank—we do not intend it to be a tripartite body.
	I hope that with this rather lengthy explanation I have adequately laid out the Government's thinking behind the creation of the Financial Stability Committee. The decision about how much detail to set out in statute in relation to matters such as this is, of course, a matter of judgment. During last week's debate the noble Lord, Lord Higgins, asked me why we were specifying such minute detail about the FSC in the legislation, while at the same time the noble Baroness, Lady Noakes, asked why the Bill is silent about the workings of the committee. I am afraid that this is one of those occasions where I will be unable to please everyone. I believe that by setting out the role and membership of the FSC in legislation, while leaving the flexibility to delegate additional functions and co-opt additional members, we have hit the right balance.
	As I said earlier, we continue to make efforts to ensure that the tripartite authorities continue to work well. Noble Lords pointed out an apparent inconsistency between the FSA urging banks to conserve capital and the Treasury urging them to lend. I do not see an inconsistency; there is common language, and the FSA, the Bank of England and the Treasury have achieved that through the tripartite system. For instance, the variable scalar—the noble Baroness asked me in a previous debate to define and explain this, which I failed to do but will happily do now: it determines capital through cycles rather than at a single point of time—was evidence of the tripartite authorities working effectively. I add that it is also evidence of the Treasury working effectively to conserve stamps because now I do not have to write to the noble Baroness explaining what a variable scalar is, although I have a suspicion that she knew and was just testing me, rather than seeking the information.
	I say to the noble Lord, Lord Turnbull, that the ability is there to co-opt members, which should allay concerns about a "gene pool". I agree with his observation about an organisation where the route to the top appears to be confined to people within it. That is a generalised organisation; I would not limit it to the Bank of England. I would simply say that any organisation is enriched by ventilation, as he described it—by having external people come in. The recreation of a new court with predominantly new members will be an important part of refreshing the Bank.
	The Financial Stability Committee and its explanation in statute will address some of the shortcomings of the Financial Stability Board. The chair of the Court of the Bank of England and the executive were never entirely clear about the nexus between the board and the independent members of court. The Financial Stability Committee makes clear that this is a joint committee that brings together the external viewpoint of the independent members of court with the internal executive of the Bank.
	The suggestion was made that we should abandon the concept of the Financial Stability Committee as further regulation will be forthcoming in due course. That may well be the case. The situation we have been through means that it is incumbent on us to look at existing regulatory arrangements, and I share with the noble Lord, Lord Northbrook, the hope that we will see the noble Lord, Lord Turner, participating in those discussions in this House. However, it would be unwise for us to delay this necessary and important addition of a new committee at the heart of the Bank in anticipation of legislation that may or may not be produced at some later stage.
	Taking my guidance from my noble friend's suggestion that I should be humble, I humbly invite my noble friend to withdraw his amendment.

Lord Eatwell: My Lords, I am grateful to noble Lords who took part in this—I was going to say "short" debate, but it has become rather a long one. I am also grateful that everyone who spoke, except one, agreed with the force of my argument—that particular one being the Minister.
	I was a little surprised to be lobbied by the Governor of the Bank of England, although in these febrile times I probably should not use the word "lobbied". The governor should have declared his interest.
	With regard to what the Minister said, the notion that there should be a financial stability objective is entirely shared. I am sure that the Bank of England has thought that financial stability has been its objective for the past 300 years, and maybe it is a bit surprised that it has to be told again—but never mind; if it is deemed to be neater to ally the financial stability objective with the monetary stability objective, that is fine.
	I still do not understand the particular statutory need for the Financial Stability Committee. The core of the governor's argument was that the committee will be advising the court and the executives are responsible to the court, so the court is the key strategy-making organisation and is responsible for the balance sheet and so on. In my structure the court would have received advice not just from the independents but from the FSA—it would have had a wide range of advice coming into it, on which it could perhaps have made more effective decisions.
	One element of my amendment that the Minister did not mention at all is that the amendments would make financial stability an overt objective of the Financial Services Authority. He did not address that issue or indeed the fact that it would be the role of the Financial Stability Committee, as I formulate it, also to advise the board of the Financial Services Authority. The Minister told us forcefully last time that financial stability was the responsibility of the Financial Services Authority; he said it was embodied in the Financial Services and Markets Act. If that is so, why does the authority not also require a committee to advise it? I suggest that the structure I have proposed is the economical way to provide a wide range of advice both to the court and to the board of the Financial Services Authority, and would be an efficient means of securing the integration of financial stability policies across the piece for both the Bank and the authority, which is what the country really needs.
	It is clear from both the governor's intervention and the Minister's remarks that the Government are not going to accept any change on this. It is also clear, I notice with interest, that the Minister accepts the argument that this may be a temporary arrangement, looking forward to the more coherent structure of regulatory legislation and institutions which is likely to come later this year. If this is indeed a temporary arrangement and the Minister has gone a tiny way towards accepting the validity of the arguments on the need for co-ordinated activity, it would be churlish of me to divide the House in those circumstances. I therefore beg leave to withdraw the amendment.
	Amendment 87 withdrawn.
	Amendments 88 to 98 not moved.
	Consideration on Report adjourned until not before 8.30 pm.

Benefits: Non-British Citizens
	 — 
	Question for Short Debate

Tabled By Lord Roberts of Llandudno
	To ask Her Majesty's Government what steps they are taking to ensure that all non-British citizens resident in the United Kingdom are provided with adequate benefits, housing, healthcare and education.

Lord Roberts of Llandudno: My Lords, I appreciate the opportunity to share my concerns and anxieties regarding the well-being and survival of many who for different reasons find themselves here in the United Kingdom. When one looks at the turmoil which faces our own citizens, tremendous sympathy goes out to them. But that does not mean that at the same time we should not look wider to see what other problems there might be.
	Some in this country have entered illegally. I am not sure whether it is my Liberal heart or my Methodist heart that has great sympathy with them. Certainly, realistically, those who are here illegally should be returned home as gently and as swiftly as possible. Last year, I welcomed the announcement that we had halted any removals to Darfur, Zimbabwe and, as regards those of the gay community, to Iran, where they faced persecution.
	The condition of some of the people who come here illegally is numbing. In my own part of North Wales only a week or so ago, some such Chinese immigrants were found to be paid tiny wages and to be forced to sleep and rest in a disused restaurant refrigerator. Such circumstances cannot be tolerated: we think of the sacrifice that some of those folk have made just to come here, dreaming that the streets are paved with gold, when we know of our own experience that that is not so.
	The Minister might be kind enough to tell us how long people who have failed with their asylum claims have to wait to be returned home. Some of those people who have not succeeded have to be here for many months before a decision is made. How satisfactory is the present system? Is it causing added harm and cost to the United Kingdom? I want to applaud and pay tribute to places such as Harmondsworth, with their concerned and caring approach to those who have failed the asylum process.
	Others who come here are citizens of the European Community. They have every right to be here and most of them will make a success of their stay. A proportion of them—it could be anything; 5 per cent or 10 per cent—do not make a go of it. For those we have the gravest concern. May I say how much we appreciate the work that is already being done for them, especially by voluntary organisations? I visit the Dallow centre in Whitechapel and see what is happening there. I work with the Barka Foundation, taking those from Poland who have not made a success of it back home. I hear of the good work carried out by some local authorities. We appreciate the work that is being carried out. I suggest that in London we need the boroughs to work together in greater co-operation. We need a pan-London strategy.
	How can Her Majesty's Government help in the present situation? It is untrue that migrant workers who arrive here can immediately draw benefits: they cannot. They have to join the workers' registration scheme. They pay £90 and it is 12 months before they are able to access any UK benefits. Ninety pounds might be little for most of us but to them it could be a great deal of money. People who come here with £300 and think that that will be enough to see them through find that that charge is levied before they can start to take the work that will enable them to claim benefits later. Is it possible for us somehow to delay the charge payable by them until they have started working and have the extra money that enables them to pay that particular fee, or to pay by instalments?
	Furthermore, they have to have a national insurance number, which sometimes takes a long time. How can we speed up that process, giving everyone who wants to work here their national insurance number? When we debated the UK Borders Bill; now the UK Borders Act, I tried to persuade the Government to prepare and make available multilingual information packs that could be distributed in the villages and towns in which the folk who come to the UK live, advising them about the problems and opportunities and where help could be obtained.
	I wonder whether the Government could reconsider that point. In other countries there is an emergency telephone number for those at a loss. I was walking in Victoria Street a fortnight ago and a perfectly respectable person there had arrived from Lithuania who could not get a job. There was no work going. Such people find themselves with their pennies and hope gone. Could we have a government-sponsored or supported helpline for such people?
	I want to say how much we appreciate the work of the National Association of Citizens Advice Bureaux. It does a tremendous job and we owe it a great debt. Last week I was so pleased that the Minister said we might look at the possibility with our European colleagues at having benefits that were paid in Poland and could be drawn from the Polish Exchequer here in the United Kingdom when people got into real need. Will the Government please explore that possibility?
	My colleague will speak about asylum seekers later. I want to point out that in 2007, nearly 50 per cent of all refused asylum seekers were from Zimbabwe, Iran, Iraq, Sudan, Afghanistan, Somalia, the Democratic Republic of Congo and Eritrea. Prior to a change in 2003, refused asylum seekers from those areas would almost certainly have been given exceptional leave to remain in the UK. That has been changed with remarkable consequences. We now have the humanitarian protection and discretionary leave categories. As a consequence, whereas 20,135 individuals obtained exceptional leave to remain in 2002, only 405 did in 2007. We would like to see some change there.
	In reviewing the treatment of asylum seekers in the UK, the Joint Committee on Human Rights recently reached the following conclusion:
	"We have been persuaded by the evidence that the Government has indeed been practicing a deliberate policy of destitution of this highly vulnerable group. We believe that the deliberate use of inhumane treatment is unacceptable. We have seen instances in all cases where the Government's treatment of asylum seekers and refused asylum seekers falls below the requirements of the common law of humanity and of international human rights law".
	Under Section 95, the asylum seeker has some payment and some way of supporting himself—although it is only 70 per cent of the social security benefit that UK residents would receive. However, that has changed and they can lose that and become totally destitute. Section 9 of the Asylum and Immigration (Treatment of Claimants, etc.) Act 2004 would withdraw all benefits from failed asylum seekers. This drives them into destitution. We should look at this again. When the new immigration Bill comes before the House, we intend to table amendments that will delete that clause.
	In conclusion, the measures we take now are inhumane. They are against our ordinary traditions. The Joint Committee on Human Rights says:
	"The policy of enforced destitution must cease. The system of asylum seeker support is in a confusing mess. We have seen no justification for providing varying standards of support and recommend the introduction of a coherent, unified, simplified and accessible system of support for asylum seekers, from arrival until",
	they leave our shores, their voluntary departure. I urge the Government to look again, in a more humane way, at this legislation.

Lord Judd: My Lords, I am sure that I not alone in wanting to thank the noble Lord, Lord Roberts of Llandudno, for raising this issue this evening. The warmth and commitment with which he brings his unashamed Welsh non-conformist values into our debates adds to the quality of our deliberations in this House. Long may that continue.
	I was therefore surprised by one sweeping point that he made at the beginning of his remarks that rather took me by surprise. He said that some were here illegally, and should of course be sent home. I wish that I thought that it was quite as simple as that. Given the dreadful story behind the situation of some of those who are here illegally, it seems that they have precious little choice but to be here. It is not quite as simple as the noble Lord suggested. I am sure that he would agree with me that, in this policy area, the Government face one of the most difficult and complex tasks. I am sure that many of us have good will towards the Government as they try to grapple with it. It is a difficult issue, and not helped by the wilful misrepresentations of some of the media.
	It is important to remember that, within the sphere of those who remain without permission, there are, as the noble Lord, Lord Roberts, suggested, different categories. There are certainly those with no protection needs in the UK who should return. But there are also those who cannot leave the UK through no fault of their own. For example, they may be stateless and have no country to return to. Their Government may not provide them with travel documents, preventing their return. They may be too sick to travel, or there may be no viable route whereby they may return home.
	There are those who, having been in the UK for a long period, have developed strong ties with it, such as entering relationships and having children. There are those who genuinely believe that it is unsafe for them to return because of armed conflict and repressive regimes. In some cases, the UK Government recognise that it is not safe for these people to go home, even though they have not granted them asylum in the UK. For example, in 2005, they refused asylum to some people from Zimbabwe but have not removed them. Perhaps slightly more equivocal is the issue of the non-Arabs from Darfur.
	We know that there is acute hardship among these people. Just think of it amidst the weather that we have been enduring for the past couple of days. Some are totally destitute, dependent on chance and spontaneous charity to survive at all. This is in a country that we are struggling to keep as one of the leading economies of the world.
	Some must survive under Section 4. It was calculated last September that there might be some 10,000 in that situation. They have accommodation of a sort provided, and must then survive on £35 a week in vouchers. How many of us, as we look at our expenses in the House of Lords, would like to think of surviving on £35 a week? We must keep a sense of perspective about these things. It is less than two-thirds of the basic income support rate. If we have something called the "basic income support rate", that presumably means that it is the basic income level. These people are somehow expected to survive on less than two-thirds of it. The vouchers are inflexible. They cannot be exchanged for cash, and in attempts to do so the unofficial rate means that they are worth only £25. They cannot be used for clothing. They cannot be used for medicaments, sanitary items or even basic essentials such as paracetamol.
	On health, I was a member of the Joint Committee on Human Rights when it produced its report on asylum. Right across the party divide, as a whole committee, we became more and more profoundly disturbed by what we saw—and really quite angry. Hence, we produced a rather tough report to which, if my noble friend the Minister will forgive my saying so, we have never yet seen a convincing reply. Think of how people with serious health needs are officially debarred from receiving the medical care that they should have. Think of the moral pressure and dilemmas that this places on the medical profession, including GPs who may be unable to ensure that the necessary medical attention can be made available. They may have to engage in subterfuges such as sending people to accident and emergency departments because that is the only way that any help will be provided. They may be watching sick people who could be prevented from getting worse getting gravely sick until it is an accident-and-emergency situation. That is a terrible pressure to put on honourable members of the medical profession. It is also counterproductive, because it may mean that social diseases go untreated and we are therefore putting the population as a whole at greater risk.
	On education, one encounters traumas among children who are fully established residents, from families that have been here for centuries, when they see dreadful things happening to children with whom they have relationships and have felt to be part of their community, when those children are suddenly removed without explanation. How does the absence of legal aid help? It probably ends up with more muddle, confusion and cost.
	The noble Lord, Lord Roberts, mentioned the Joint Committee on Human Rights and its report. I wonder whether we had the same sort of briefing, because he picked the two excerpts from the report that I was going to read. I shall not repeat them. However, apart from the humanitarian and moral issues, what worries me is the political issue. We live in a terribly dangerous age. It does not take many people who have been embittered to do terrible things or become caught up in them. I sometimes think that some experiences that people go through in immigration are almost designed to embitter them and make them possible targets for extremist recruitment.
	But, of course, what is more important is what sort of society we want to be. We cannot appease prejudice and we certainly cannot buy off wilfully malicious press coverage. We have to look at the impact on race relations in general in society, if we appear to be subjecting people to embittering experiences in their search for asylum, particularly when, as the noble Lord rightly said, one remembers the traumas which these people have undergone.
	At a time like this when the going gets tough, I suggest that this is the very time to stand firm on the principles which matter. This requires strong political leadership, not trying to appease the worst instincts in society, in which we should be behind those who carry the political responsibility on our behalf.
	Twenty-eight organisations have written to some of us about the issues as they see them from church and caring organisations to voluntary organisations in the front line. These are responsible, sensible organisations that many of us support. They have sent us a very interesting and detailed brief. I give my noble friend notice that I intend to send it in its entirety to him in the hope that I can be given a detailed response from the Government on all the points it raises. But above all let us remember that history will look at us now, in an increasingly globalised, interdependent world, and judge us pretty toughly on how far the values that we say are essential to Britain, and of which we say we are proud, are really applied in the immigration and asylum process.

Lord Kirkwood of Kirkhope: My Lords, we have heard two very powerful speeches. I am pleased to follow the noble Lord, Lord Judd, whose wisdom was demonstrated in his powerful, well argued 10-minute speech. I concur with everything that he said. The House is indebted to my noble friend for introducing this subject with his usual Welsh irrepressible enthusiasm. His Welsh is beginning to develop a Polish accent as he discusses these issues with these interest groups, which I agree are vital. All these people who look after the communities that they seek to serve deserve our thanks for the work that they do.
	I wish to comment on a focused issue relating to refused asylum seekers, as we are now seeing some of the fruits of the legislation that has been promoted over the past 10 years. I agree with the noble Lord, Lord Judd, that this is a difficult area for any Government to handle. However, worrying signs are emerging that some aspects of the legislation are coming home to roost in a way that should be, and is, uncomfortable for us all.
	I do not want to repeat the quotations that have already been drawn from the invaluable report of the Joint Committee on Human Rights. Rather, I shall consider whether an entitlement to work and benefit provision acts as a magnet for abusive and potentially inept asylum claims. I was struck by the fact that the committee took no comfort from the claim of the then Home Office Minister, Mr Liam Byrne, that there was a real danger of a "pull factor"—that is how it is known in the jargon—occurring if people were given the right to work and access to a continuous flow of benefit income. The committee stated, in what I think is the most powerful recommendation in the report:
	"We recommend that in the development of asylum policy the Government should proceed on the basis of evidence, rather than assertion, which evidence should wherever possible be published".
	I freely admit that I am not an expert on the technicalities of asylum, but looking at the Home Office's own research and at my own experience in Scotland, where there is a slightly different perspective on some of this, I believe that promoting sensible levels of subsistence benefit on which people can have a chance of living over long periods does not act as a pull factor. The noble Lord, Lord Judd, made the important point that Section 4 support is meagre, but it is supposed to last only for a very limited period. However, some of these families live on Section 4 support for long periods. That was never the policy intention and it has consequences for people's health, particularly children's health, which the Government can no longer afford to ignore.
	We need to be clear about where the Government are getting their evidence from as regards denying access to work and Section 95 benefits over a longer period for fear of people abusing access to additional services. In Scotland, people have access to secondary health provision under Section 4, because the relevant orders are different. In Scotland, there is a much more integrated approach to the whole application process. When families, particularly those with children, make an application in Scotland, there is a much more involved process, which sometimes leads to a voluntary return when people are refused entry. Families proceed along a much smoother path and receive a lot of co-operation and support that is just not available in England; I believe that the same circumstances apply in Wales. The English provision needs to be looked at again. If we were able to provide more support, we would get a better outcome for everyone concerned, even for those who return voluntarily. The Government need to re-examine their claims with regard to the pull factor.
	A position statement from the Royal College of Psychiatrists, Improving Services for Refugees and Asylum Seekers, goes out of its way to say that the Government have done a huge amount in improving mental health services for the black and ethnic community. However, it says that there is absolutely no strategy for refugees and asylum seekers. The psychiatrists see incidents of mental illness now emerging. That is not surprising to anybody who knows the situation. The psychiatrists are now professionally concerned that mental illness is arising due to the socio-economic factors to which we subject refused asylum seekers. That matter needs to be addressed.
	I wish to make three suggestions focused on the background that I have just explained. First, we should consider allowing Section 95 cover to continue throughout any claim from beginning to conclusion, whether a voluntary or a forced return to a home country is involved. I shall explain why that is sensible financially in a moment. Secondly, I suggest that we should permit legal entry to work after 26 weeks. Measures with which the Minister and I are familiar such as welfare to work and the right to bid for contracts to get people off benefits and into work can work on a spend-to-save basis. If we could demonstrate that people on Section 95 support could trade themselves off benefit and support themselves for the duration of the rest of their claim, irrespective of whether there is a forced or a voluntary return, there would be an absolutely cast-iron cost-benefit analysis case to make for taking such an approach. Thirdly, I hope that the Minister and his department have considered the experience in Scotland, where an integrated partnership approach is taken. I have seen CoSLA reports dealing with forums that encourage people to return in a co-operative and supportive way. I believe that such an approach would improve the situation for returnees. In Glasgow, there is an assisted family return project.
	The case for taking out Section 4 and Section 9, as my noble friend mentioned, but particularly Section 4, is that Section 4 costs the public purse extra for a number of reasons. First, accommodation has to be found, which can be very expensive for local authorities. Secondly, the administration costs of the hated voucher scheme are a complete waste of money and an expense for nothing. The scheme forces people into misery; it is not effective and it does not work. Thirdly, the review of those entitled to Section 4 payments costs money. The review and appeal costs add to the totality of the present system's costs. The caseworker resources tied up in the administration of Section 4 are a waste of money, particularly given the review of the 200,000 cases that the Home Office are looking at. Those resources are important. Finally, as the noble Lord, Lord Judd, said, NHS support in England, where people are sent bills if they receive secondary care, costs money.
	My final point relates to supporting these changes and abolishing Section 4. The cost of removal on a voluntary basis, as we know from Home Office figures, amounts to £1,000 on average. The cost of a forced removal costs £11,000. Therefore, for every forced removal that we can avoid, we can save the public purse money, we can turn that resource into support for these families and we can get a much more satisfactory and sympathetic support system for refused asylum seekers. This argument will not go away and I hope that the Government will give it further consideration as a result of my noble friend's debate.

Lord Taylor of Holbeach: My Lords, I thank the noble Lord, Lord Roberts of Llandudno, for securing this dinner hour debate. I should declare my interest as an employer of seasonal workers from other countries within the EU at different times around the year. They represent a small but significant percentage of our workforce, which changes with the seasons. Most of them go home as the work ends, although many return regularly. I might add that our workers from Poland and such countries are hard-working, conscientious and prepared to apply their intelligence to the job in hand. I can also assure noble Lords that we are an Investors in People company and care equally for all our staff.
	This debate is a sequel to last Wednesday's Question asked by the noble Lord, Lord Roberts, which covered similar ground. However, I come to this subject from a very different direction from that of the noble Lord and, indeed, the noble Lords, Lord Judd and Lord Kirkwood. There is much concern about this issue. It cannot have helped the acute sensitivity of the subject when the Prime Minister chose to raise the issue of,
	"British jobs for British workers".
	If ever a soundbite came back to bite its owner, this was it. What does the Minister have to say on this? Similarly, the Immigration Minister, Phil Woolas, has said that entitlements to benefits should be for citizens of our country, not other people. Does the noble Lord agree?
	According to government figures, there are 199,667 non-British citizens in receipt of state benefits, including child benefit, jobseeker's allowance and housing support. Given the current climate, does the Minister expect this figure to increase and, if so, what estimate has his department made of the increase? Of course, it is possible that the economic recession may persuade some migrants to return home, but there is an equal possibility that they might stay and become benefit dependent. After all, Tom Wlodarski of the East of England Polish Community Organisation said:
	"Families are staying on, as they feel it is better to ride out the recession here in England".
	Urszula Jukes, owner of the Polish recruitment agency Access Europe, said:
	"For many the answer is to bring their family here where they can support them with the higher UK wages and government support. Families are almost always better off ... as there is the generous welfare state".
	This points to an increasing, not reducing, area of government engagement with this issue as a result of the recession.
	The numbers are significant. Home Office figures state that some 895,000 eastern Europeans have been allowed to work in the UK since the EU expanded to include the former eastern bloc nations of Estonia, the Czech Republic, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. Of those who are officially registered, nearly 200,000 are in receipt of benefits. These figures go back to September last year and do not take into account the dramatic economic decline of the past few months and the massive job losses that it will bring. If the numbers are significant, so is the money. Can the Minister tell me the total amount paid in benefits to non-British citizens? It is not necessary for all those families to reside in the UK. Will he update the House on how much British child benefit and child tax credit is paid to Polish workers whose children live in Poland and say whether the Government have any plans to change the rules?
	I am pressing the Minister hard on this, because it is a sensitive issue and the Government can defuse this sensitivity only by being open about the scale of the problem, the issues involved and their intentions. The soundbite messages of the Prime Minister and Mr Woolas do not help the Government to gain the confidence of the British people. However, we should be happy that the noble Lord, Lord Roberts of Llandudno, has given us all the opportunity to debate the benefits of migrant workers. I look forward to the Minister's reply and his response to my questions.

Lord McKenzie of Luton: My Lords, I am grateful to the noble Lord, Lord Roberts, for initiating this debate and to all noble Lords who have contributed. As set down, its scope was wide, although in some respects it has focused on asylum seekers, so my response will seek to cover all aspects.
	We fully recognise the impact that inward migration has had in boosting economic growth in the UK, in particular helping to meet previous shortages of labour and skills in the UK labour market. The diversity that this brings has enriched our culture. We also know that those suffering oppression around the world have long looked to the UK for safe haven.
	Against this background, and consistent with our international obligations, it is important that we provide adequate support for people entering this country, especially when they come here to work. At the same time, we need to be aware that there are people entering the UK who will seek to take undue advantage of our social security and other care and support systems, so we need to balance the support we provide for foreign nationals entering the UK with protection of our internal support systems and the taxpayer. The rules we have in place, combined with immigration controls, seek to meet these aims. They balance help where appropriate with measures to protect our financial and care systems. As my noble friend Lord Judd said, sometimes these are difficult tasks.
	Access to social security benefits is a complex topic which cannot be dealt with comprehensively in the time allowed for this reply. Different considerations apply for contributory benefits, income-related benefits and non-contributory benefits, such as attendance allowance. The nationality of claimants is not recorded on benefit, tax credit or child benefit data, because nationality is not typically a condition of entitlement. The noble Lord, Lord Taylor, alluded to the fact that data are collected in respect of A8 nationals, and that information goes into Home Office monitoring report. However, nationality is not included on benefit records, so information on the aggregate amounts is not available.
	Contributory benefits are payable to anyone who satisfies the contribution conditions and other conditions of the benefit, regardless of nationality or length of stay in the UK. Most non-EEA nationals, are excluded from income-related benefits and non-contributory benefits, because they are subject to immigration control, which includes a requirement that they have no recourse to public funds. However, vulnerable individuals with certain types of leave to enter or remain in the UK can be eligible for benefits, provided that they are habitually resident in the UK. This can include those granted refugee status and humanitarian protection. In general terms, EEA nationals with worker status have recourse to public funds and may be entitled to claim income-related benefits. This could include housing benefit and council tax benefit. Should they fall out of work but remain in the labour market, they may claim jobseeker's allowance.
	However, matters are more restrictive for accession country nationals, A8 and A2. They have worker status while they are working and are registered, as appropriate, with the registration or authorisation scheme. The noble Lord, Lord Roberts, asked about the fee. The registration happens when the worker is in employment—employment has to precede it—and the fee is paid only on first application. However, workers retain this status only if they have been working and registered for at least 12 months. Should this not be the case, entitlement to JSA and housing and council tax benefit will fall. Similar considerations apply to access to child benefit and tax credits. These situations can generate some of the problems around rough sleeping, which is why we are working with colleagues in accession countries to raise awareness of the eligibility rules and discourage those unlikely to find work from coming to the UK.
	Asylum seekers, as the noble Lord has identified, are subject to immigration control and have no recourse to social security benefits until they have been granted leave to remain in the UK. However, those who are destitute and have children—I will come to this later—can apply through the UK Border Agency for both financial support and help with accommodation. The level of support reflects its temporary nature and the fact that supported asylum seekers do not pay council tax or utility bills.
	Last year, we extended support to cover facilitation of travel to medical appointments, the nutritional needs of pregnant mothers and young children, and clothing for children. The noble Lord, Lord Roberts, posed several questions, particularly about asylum seeker applications and the average times taken for decisions on asylum claims. We are making decisions quicker than before and beat our target of concluding 40 per cent of cases within six months by the end of last year. Indeed, we are on track to conclude the majority of cases within six months by the end of December 2008. We aim to conclude 90 per cent of cases within six months by 2011.
	The noble Lord also asked how long failed asylum applicants had to wait before they were removed. In 2007, we removed one person every eight minutes—more than 63,000 people in total. We have been clear that our top priority has been public protection, as part of a wider enforcement agenda.
	Most migrants are privately housed, and around 95 per cent of householders who have arrived in the UK in the past two to three years live in the private rented sector. We know that houses of multiple occupation are a key source of housing for significant and often vulnerable groups in society. We also know that sometimes the housing conditions faced by migrants are poor. The introduction of mandatory licensing in 2004 of all privately rented HMOs, and discretionary arrangements for local authorities, should help to alleviate these issues.
	The focus of provision of social housing is based on need. In framing their social housing allocation schemes, local authorities must ensure that "reasonable preference" is given to households that are homeless, overcrowded or have medical or welfare needs, including grounds relating to a disability. This applies equally to British citizens and eligible non-British citizens.
	Inevitably, some people from abroad slip through the net, and in some cases end up sleeping rough on the streets. We recognise that this is a particular problem in London, and, to a lesser extent, in places such as Peterborough and Reading. We are providing funding to support local authorities in helping A8 nationals find work and, in some instances, pay for travel back to their own countries. We are also supporting Homeless Link to reduce rough sleeping among EU migrants in London and, as I said earlier, are investing in an extensive information campaign in accession countries to ensure that prospective migrants are aware that they will not have immediate access to social benefits.
	Refugees are particularly vulnerable, and we are working with our partners to secure good housing outcomes for refugees and other migrants through developing the housing element of the UK Border Agency Refugee Integration and Employment Service and through the Housing Associations' Charitable Trust "Opening Doors" initiative to improve the capacity of housing associations and refugee organisations.
	Healthcare, too, is an important issue for migrants, as it is for all our citizens. The rules and procedures for eligibility to free NHS care for non-British residents balance the principles of fairness, humanity and affordability with the full treaty rights of all EEA citizens, and support for the legitimate movement of people to and from the UK. EEA citizens who take up residency in the UK for a reasonable period have full entitlement to both GP and hospital care. Shorter-term visitors receive all necessary treatment free of charge while they are here. However, this does not apply to pre-planned treatment without special arrangement.
	We have bilateral health agreements with more than 30 other countries, including some in eastern Europe, Eurasia and many Commonwealth colonies. We have further exemptions for visiting students and workers employed by UK-based companies. The rights of EEA and bilateral country nationals are of course reciprocated, so that British nationals travelling, working or residing in these countries receive healthcare on the same priority and charging basis as nationals of that country.
	I should like to make it clear that we do not provide routine free healthcare for unregulated illegal migrants or other visitors who may come seeking free healthcare. However, it is important to state that urgent treatment should never be denied to, or delayed for, any person, irrespective of their legal status or financial position. They should be charged subsequently for their care and we take reasonable steps to recover the cost. Our regulations are designed to protect the NHS, a free service established primarily for British residents, from inappropriate access by overseas visitors, while providing appropriate entitlements to EEA citizens and other current residents.
	Asylum seekers awaiting a formal decision on their claim are eligible for both primary and secondary NHS medical treatment free of charge; and the basic humanitarian needs of unsuccessful asylum seekers continue to be met. The Department of Health and the Home Office are currently undertaking a review of the rules governing immigrant access to healthcare.
	I can skip the section of brief on education, except to say that under Section 13 of the Education Act 1996, local authorities are under a duty to ensure that sufficient primary and secondary education is available to meet the needs of the population in their area. That applies irrespective of immigration status or rights of residence and, of course, includes school-age asylum-seeking children.
	I shall pick up a number of additional questions posed. The noble Lord, Lord Taylor, asked about the comments of the Prime Minister about British jobs for British workers. As the Prime Minister made clear, we are taking action to stimulate the economy. Jobs need to be filled and we are taking action to ensure that the British workforce will have the skills that it needs to be well placed to compete for those jobs.
	A number of noble Lords made reference to the JCHR's criticism of our treatment of asylum seekers. Of course, the Government responded to the committee's 17th report on 5 July 2007. We believe that our asylum support system is fair and properly balanced. There are safeguards for supporting unsuccessful asylum seekers who are vulnerable; for example, families with minor dependents and those who have a genuine reason for why they cannot return home. The UK Border Agency is committed to working with stakeholders to continue to improve the asylum system and the treatment of asylum seekers. The recent NAO report recognises considerable success in improving the asylum system, but clearly there is more to do.
	The noble Lord, Lord Roberts, asked about a helpline, a pan-London strategy. Clearly, those are issues about which we could talk further with the Mayor of London and with the Minister for London. With support from communities and local government, the Improvement and Development Agency has developed a template for local authorities to prepare information packs on key information for migrants. It brings together examples of material used by local authorities in existing welcome packs and it is a rich source of expertise and ideas for local authorities reviewing their welcome packs or considering producing one for the first time.
	A number of noble Lords made reference to Sections 4, 9 and 95. On Section 9, the UK Border Agency is currently considering, with stakeholders, our review of asylum support under simplification and whether to repeal Section 9 will be part of that consultation. As the noble Lord, Lord Kirkwood, said, Section 4 is focused on temporary support. Indeed, the legislation does not allow cash to be provided, but we shall continue to work with a variety of stakeholder groups. We believe that it is important to continue to listen to any concerns that groups and individuals might have and to work together wherever possible to identify those areas where the system can be improved.
	The noble Lord, Lord Roberts, asked about national insurance numbers. The key management indicator target is 86 per cent of applications processed within 30 days and we are exceeding that. On Section 95, we are looking at a reform of asylum support under our simplification proposals and we shall pick up the issue in conjunction with that.
	The noble Lord, Lord Roberts, asked about EEA migrants claiming unemployment benefit from their home state. As we debated last week, when the noble Lord asked a Question, there are proposals to do that when workers are posted to the UK.
	My time is exceeded. We should be proud of the welfare system we have in this country. It provides a safety net for people in time of need and seeks a responsible engagement for individuals to access work. Meanwhile, our NHS is the envy of the world. While our humanity dictates that we share these benefits with those less fortunate, we know that the real world demands a more constrained approach. As I said earlier, we need a balance between appropriate support for foreign nationals coming to the UK, sustainability of our system and protection for taxpayers. I commend this approach to noble Lords.
	Sitting suspended.

Banking Bill

Bill Main Page
	Bill as Amended in Committee
	Explantory Notes
	Amendment Paper
	3rd Report from Constitution Committee

Report (2nd Day)(Continued)

Clause 235: UK financial stability
	Amendment 99
	 Moved by Lord Myners
	99: Clause 235, page 120, line 20, after "interest" insert "(including any reasonably likely future interest)"

Lord Myners: My Lords, in Committee, the noble Baroness made several eminently sensible probing observations on the provisions. I promised to take them away and come back with amendments on Report. As promised, Amendments 99 and 100 will modify new Section 2C(2), to be inserted into the Bank of England Act 1998, to broaden the circumstances in which members of the FSC must disclose interests. That will lead to a member being unable to vote unless the committee resolves that there is no conflict of interest.
	Under the amendments, the member must now disclose any interests in a business or dealing that falls to be considered by the committee regardless of whether the interest is direct or indirect or a current or likely future interest. That is the appropriate scope of the provision and I am grateful to the noble Baroness for helping the Government to improve the Bill in that way. Last Monday in Committee, the noble Baroness also asked me whether subsection (3) was necessary. On consideration, with the amendments that I have just outlined, it overlaps to a great extent with the mechanisms just discussed concerning disclosure of interests. Subsection (3) goes further, in that it also requires a person to withdraw from debates on matters which touch or concern him or her, but that is simply good committee practice and the committee, as master of its own procedure, can adopt such practice if it wishes. Therefore, Amendment 102 will remove subsection (3). I am very grateful to the noble Baroness for bringing those two issues to our attention and I beg to move.

Baroness Noakes: My Lords, I thank the Minister for listening and for acting.
	Amendment 99 agreed.

Baroness Fookes: My Lords, if Amendment 100 is agreed, I cannot call Amendment 101 by reason of pre-emption.
	Amendment 100
	 Moved by Lord Myners
	100: Clause 235, page 120, line 21, leave out "with the Bank"
	Amendment 100 agreed.
	Amendment 101 not moved.
	Amendment 102
	 Moved by Lord Myners
	102: Clause 235, page 120, leave out lines 29 to 32
	Amendment 102 agreed.
	Amendment 103
	 Moved by Baroness Noakes
	103: After Clause 235, insert the following new Clause—
	"Debt: assessment of adequacy of resources
	After section 2C of the Bank of England Act 1998 (Financial Stability Committee: supplemental) as inserted by section 228 above insert—
	"2D Debt: assessment of adequacy of resources
	(1) The Bank of England must write to the FSA twice a year, setting out its assessment of financial stability and the FSA must have regard to that assessment in the exercise of its duties in respect of paragraph 4 of Schedule 6 to the Financial Services and Markets Act 2000 (threshold conditions: adequate resources).
	(2) The Bank of England must publish its letter and the FSA must publish its response.
	(3) The letters referred to in subsection (2) should not deal with the position of specific financial institutions or other persons.""

Baroness Noakes: My Lords, the amendment adds a new clause after Clause 235. This new clause creates a new mechanism between the Bank of England and the FSA and contributes to a public debate and understanding of the state of banking. In doing so, it responds to calls made by both the Governor and the Deputy Governor of the Bank of England for, to use the governor's words,
	"an additional instrument to stabilise the growth of the financial sector balance sheet".
	Of course, the instrument exists at a micro-level in the form of prudential capital ratios agreed by the FSA with individual banks, formally through the threshold conditions provided for by the Financial Services and Markets Act. The governor was referring to a macro-policy instrument, which is what Amendment 103 is intended to deliver.
	I do not think there is any doubt that the banks' balance sheets were over-leveraged. Indeed I have heard the noble Lord, Lord Myners, talk about this. There is also no doubt that the analysis was there to be seen, for those who took the trouble to look at the available data. Therefore, this is not an issue of available data but more a lack of focus of what the data meant in policy terms.
	The Bank of England has been issuing a financial stability report twice a year, but I do not believe that it has had much influence. It is a rather academic publication. It does not reflect clear policy positions of the Bank of England and is not designed to be, nor is it in fact, a document which sets out to change policy.
	When the Bank of England ran banking supervision, there was an automatic connection between the Bank's macro analysis and its micro decision-making, because only one institution was involved, culminating in the responsibility of the governor himself. That of course disappeared when the Government chose to transfer banking supervision to the FSA. I should stress that I am not in the camp of those who want to return banking supervision to the Bank. I believe that, in principle, the FSA should be the better body. If it gets its act together, it ought to do the job well. However, I also believe that we need to be more specific about the linkage between the banks' judgment about the state of banks' balance sheets, and the levels of debt in the country, and the FSA's responsibilities to translate that into practical regulatory action.
	There should also be greater public awareness of the issues. These issues are too important to be discussed only behind the closed doors of the tripartite arrangements. My amendment, which is a gamma version of the beta test version that I moved in Committee, requires the Bank to write to the FSA twice a year, setting out its assessment of financial stability. The FSA then has to have regard to that when carrying out its bank supervision. The Bank's letter to the FSA and the FSA's response would be published.
	This amendment avoids a criticism of the version that I moved in Committee in that proposed subsection (3) specifically avoids referring to specific institutions. That was never part of my intention. Rather, the FSA should respond in terms of the general approach to tightening or loosening capital or liquidity requirements.
	The Minister said in Committee that this mechanism would make life uncertain for regulated firms. The reverse should be the position, because of the transparency of the process. If all of the analysis and debate were kept secret within the tripartite authorities, which is what the Minister argued for in Committee, that would generate uncertainty for firms. The plain fact is that firms should expect to have their commercial policies changed as a response to the overall analysis of developments in financial stability. The fact that they were not checked at all during the decade or so of balance-sheet expansion was a blot on the history of financial regulation in this country, and that is exactly what we need to address. I beg to move.

Viscount Eccles: My Lords, I support my noble friend's amendment. We live—is it supposedly?—in a sophisticated democracy, and it is a fault of Governments that they do not explain to the electorate what is happening to them. That is very much in evidence at the present time. The transparency inherent in my noble friend's amendment is a very important issue and we should support it.

Lord Myners: My Lords, this amendment, similar to the one that the noble Baroness moved in Committee, would create a requirement for the Bank of England to write to the FSA on the subject of financial stability. The FSA would be required to respond to any such letter and have regard to it when determining whether the banks are meeting their threshold conditions with respect to the adequacy of their resources. Judging from the title of the proposed new clause, I see that such communication is to have regard to the level of debt.
	In Committee, the noble Baroness indicated that the purpose of her amendment was to address what she identified as a "policy instrument gap" between the Bank of England and the FSA. She suggested that the macro-level analysis of the Bank of England was insufficiently integrated with the work of the FSA in regulating individual firms. If noble Lords will allow me, I should like to address this specific concern before turning to the details of the proposals made by the noble Baroness.
	It is clear that we are in challenging times. It is also clear that the events of recent months were unanticipated; indeed, they were not in their entirety predicted by any central banker or regulator that I am aware of. With respect, I do not believe that our present difficulties have emerged as a result of the lack of policy instruments of the kind that the noble Baroness suggests. Nor do I believe that any major failure of the UK's regulatory framework has led directly to the difficulties facing our financial system today. All countries are facing serious economic challenges, regardless of their regulatory frameworks and regardless of whether they have single or twin peak regulation. To lay the blame for the economic problems that we face on the nature of the regulatory framework of any individual country seems to me to be mistaken.
	I do not believe that any "policy gap" exists in the lines of communication between the Bank and the FSA, but I recognise the concerns raised by the noble Baroness, and I am grateful to her for raising this issue again. I hope that I can reassure her both on the general point with regard to the effectiveness of the co-operation between the FSA, the Bank of England and the Treasury, and with regard to some of the specific policy issues that she raised in Committee.
	When we considered this point in Committee, the noble Baroness drew attention to specific issues that she felt had been insufficiently considered by the tripartite authorities. In this regard, she mentioned the views of the Deputy Governor of the Bank of England on the financial cycle. I pay tribute to the tremendous work done by |Sir John Gieve as Deputy Governor of the Bank of England. He will be retiring shortly, but he has served the Bank in an extraordinary capacity in the most challenging times and often in quite hostile circumstances. I commend his contribution to the work of the Bank.
	I assure noble Lords that the tripartite authorities are considering very carefully the implications of the current financial crisis, including the observations by Sir John Gieve and the other deputy governor, Charlie Bean. They have both identified excessive debt as a causal factor in the current crisis, but they have not called for amendments along the lines of those suggested by the noble Baroness, Lady Noakes.
	With respect, I believe that the noble Baroness is mistaken when she indicates that the current arrangements for the sharing of views within the tripartite, on this or any other issue, are insufficient. As I indicated in Committee, I strongly believe that both the Treasury and the FSA should have full access to the advice and views of the Bank of England when taking decisions in pursuit of their respective functions, but both the FSA and the Treasury already have sufficient access to the wisdom of the Bank. The tripartite authorities meet on a regular basis—monthly, weekly and at times daily—at both the principals' and the deputies' level, and there are ample opportunities for the Bank to raise any concerns that it may have about debt or any other matter that it believes is important to financial stability. In short, the Bank of England lacks no opportunity for voice.
	I hope that I have satisfied the noble Baroness's concerns about the need for a new clause such as the one that she proposes. I should like to turn now to the difficulties inherent in the proposed new clause. Fundamentally, it would require the Bank and the FSA to publish letters. This returns to the difficult tension between transparency and the need to avoid undesirable impacts on the market; we will return to that tension later on Report. Some occasions may call for a frank exchange of views between the Bank and the FSA which, from the perspective of market sentiment, it would be imprudent to subject to publication.
	Perhaps I may follow up on the concerns I raised about the noble Baroness's amendment in Committee. Her new clause rightly reflects the fact that published letters should not deal with the position of specific financial institutions or other persons. However, given the Bank's role as a lender of last resort, the most useful advice that it could offer—and, as I said, already does offer—to the regulator regarding financial stability is highly likely to relate to specific institutions or other persons who are in receipt of liquidity or other financial assistance from the Bank. Clearly, that could not be made public. Therefore, any information in a public letter would have to be based on aggregate-level assessments of debt in the financial system as a whole.
	It is hard to know how the FSA could meaningfully respond even to such an aggregate assessment without making reference to specific firms. The FSA conducts its supervision on a risk-based basis, taking into account specific factors that affect each firm individually. It would have to evaluate the Bank's advice in this same way and would have to consider the impact of the Bank's aggregate assessment on each institution it supervises. Noble Lords will remember that this was one of the principal objections I raised to this clause in Committee. The regulator's independence in making judgments about individual firms would be undermined if it had also to have regard to aggregate-level judgments made by the central bank. Putting aside that fundamental objection for the moment, I fail to see how the FSA could publicly respond to the Bank in any terms other than that it had noted the Bank's advice and would take it into consideration.
	While agreeing with the need for the tripartite authorities to work effectively together, and with the principle of information-sharing between them, I cannot agree that this new clause provides a suitable mechanism. However, it may be of some reassurance to note that in Clause 243 we are taking steps to ensure that the Bank of England is empowered to share with other members of the tripartite specific information about individual financial institutions and with regard to financial stability. Tripartite co-operation can only be enhanced as a result. I strongly believe that the provisions of Clause 243 will address any remaining concerns that noble Lords may have.
	In addition, I would of course accept that there are lessons to be learnt from the financial crisis. Indeed, regulators the world over are striving to learn them. Here in the UK, the FSA has embarked on an ambitious supervisory enhancement programme in the wake of its report on Northern Rock, and the noble Lord, Lord Turner, is conducting a further review of the way in which the authority carries out its functions. The Bank of England, too, is undergoing change as it steps up to take on the new responsibilities which this Bill confers on it, particularly with regard to the special resolution regime. I can assure the noble Baroness that the tripartite authorities are active, engaged and co-operating closely to address the challenges to financial stability that we currently face. There is no need for new public reporting structures to be introduced to make this process of collaboration function.
	In closing, the noble Baroness, Lady Noakes, made reference to the Bank of England's financial stability report. Although that is a high quality document, it tends towards the academic. It is not necessarily read by the right people and the Bank of England is working hard to ensure that it gets into the hands of independent directors, heads and members of risk and audit committees, rather than into academic libraries. I hope that the Bank might move towards the less Delphic style of communication that the governor himself evidences in oral evidence to the Treasury Select Committee and in his speeches. I hope that the Bank's financial stability reports might also learn from the examples I cited. I do not believe that a report of the sort envisaged in this amendment would be appropriate. On that basis, I ask the noble Baroness to withdraw her amendment.

Baroness Noakes: My Lords, I am disappointed by the Minister's response, which I could characterise as the not-invented-here variety. He said that banks' balance sheets were not to blame for the financial crisis. I did not suggest that what had happened over the past decade or so on banks' balance sheets was to blame. However, as the regulatory authorities missed a trick in their regulation of banks' balance sheets during that period, there is a good question to be asked about why that was.
	The Minister talked about all these interactions in the tripartite authorities. There is a big issue about how effective those interactions are and the Minister will just have to accept that many of us are deeply sceptical about it. We are not clear whether there is a meeting of minds—whether, if the Bank says something, it is heard, in a deep sense, by the FSA. There is no evidence of that to date. The issue is not so much about what happens behind closed doors but, as I tried to say in my Amendment, about getting a greater public debate. I do not believe that the financial stability report is the kind of document that could generate that debate. It is a lost cause, if you like.
	The Minister said that the most useful advice would relate to stressed institutions, but I do not believe that that is the case. The issue is to make sure that the macro risks, as perceived by the Bank, are fed into the FSA's own micro-level risk-assessed approach to the individual institutions. As I said, the Governor of the Bank of England, in a speech only last month, referred to the need for,
	"an additional instrument to stabilise the growth of the financial sector balance sheet".
	What was the governor referring to? I do not believe that he was referring to more deep and meaningful conversations in the tripartite authorities. I believe that he was referring to something with an external relevance and publication so that the issues are properly raised. It is clear that the Government will have a closed mind to the useful suggestions of the Conservative Party, unless and until they choose to steal them at a later stage and claim them as their own. I will therefore not pursue my amendment further. But it is a great pity. I beg leave to withdraw the amendment.
	Amendment 103 withdrawn.
	Clause 242 : Weekly return
	Amendment 104
	 Moved by Baroness Noakes
	104: Clause 242, page 122, line 31, leave out "shall cease to have effect" and insert "is amended as follows—
	(a) for "on some day in every week to be fixed" substitute "as prescribed";
	(b) for "in the next succeeding London Gazette in which the same may be conveniently inserted" substitute "as soon as is practicable subject to the need to protect the public interest."

Baroness Noakes: My Lords, Clause 242 completely removes the requirement placed on the Bank of England to publish a weekly return, which has been the position since 1844. We can see that there are drawbacks in the weekly publication, but we should be wary of removing information completely from the public domain. No alternative reporting requirement is placed on the Bank of England by Clause 242, so that is what my amendment would do.
	In the place of weekly publication, I have proposed two changes to the 1844 Act with my amendment. The first is to allow the Treasury to prescribe the form and frequency of the return, so that it can move from weekly if that is appropriate. The second is to modernise the publication requirement so that the existing requirement to publish in the next London Gazette is replaced by a broader requirement to publish,
	"as soon as is practicable",
	but with an important let-out on the basis of public interest. I hope that the Government will not insist on letting the Bank of England retreat into secrecy. The Bank is a public body and ought to be open and transparent. The Treasury should call the shots on publication, not the Bank. That is what my amendment seeks to achieve. I beg to move.

Lord Myners: My Lords, Clause 242 removes a requirement laid out in the Bank Charter Act 1844, which stipulates that the Bank of England should publish a weekly return. The weekly return is a one-page summary of the Bank's monetary assets and liabilities for the week in question. Under the clause, the Bank is no longer required by law to publish such a weekly statement, although, if it so chose, it could still publish such a return and may continue to do so for a period of time.
	When we discussed this issue in Committee, it became apparent that the issues underlying the debate were twofold, with the need for transparency set against the need to protect against untimely disclosures that could have a negative impact on market sentiment. If noble Lords will permit me, I should like to begin by addressing some of the points that emerged in that debate.
	In Committee, the noble Baroness, Lady Noakes, suggested that the Government were taking an all-or-nothing approach to the transparency of the Bank of England. I reassure noble Lords that that is not the case. The Bank of England has no plans immediately and comprehensively to cease reporting as a consequence of this provision. Rather, it will be empowered to determine an appropriate level of reporting frequency and I believe that it will propose to consult when determining that reporting detail and reporting frequency.
	Noble Lords also expressed concern that this step could have a broader negative impact on the transparency of the Bank of England as a public institution. As I indicated in Committee, the Government have a strong commitment to transparency and believe that the free and effective flow of information is vital to efficiently functioning markets, as well as to the trust that is placed in public institutions. Indeed, matters of public interest with regard to the Bank of England are already published by other means.
	I reiterate the point that I made in Committee, which was that the weekly return is not needed to ensure that the Bank operates transparently. Other reporting obligations are placed on it, including the requirements to respect Companies Act reporting standards as laid out in Section 7 of the Bank of England Act. I alluded to this in Committee. Furthermore, as I indicated previously, the retention of a legal requirement to produce a weekly return may force the Bank of England to make disclosures that are harmful to financial stability. For this reason, the Government, with the support of the Bank, consider that it is appropriate to revoke the requirement to publish a weekly return and to allow the Bank, after consultation, to decide how it is to disclose such information as is required to maintain market confidence.
	In the light of the difficult tension between transparency and the need to retain market confidence, to which I alluded earlier, I have some sympathy with the amendment laid by the noble Baroness. I appreciate that she has carefully considered how to modify the provision in question, but I reluctantly remain of the view that the Bank of England is best placed to determine how to balance the very real tensions to which I have referred.
	Noble Lords have previously highlighted the fact that it is unusual for a public institution to determine the level of transparency to which it is subject, but I remind the House that the Bank of England will be doing so under its statutory duty to contribute to the protection and enhancement of financial stability, and that this level of delegation is appropriate, given that duty. Appropriate transparency on the part of the Bank will contribute to confidence in the financial system and I am sure that the Bank will recognise that.
	I turn to the technical aspects of the noble Baroness's amendment. Under the amendment, the reporting of the Bank of England would cease to be a weekly return and would become a periodic return. An effect of the amendment would be that the period would be prescribed by the commissioners of Her Majesty's Revenue and Customs, given the stipulations of the Bank Charter Act 1844. I assume that that is not her intention. The technical difficulties aside, my objection to the amendment is that it does not answer the Government's concern that, whenever a return is published, those speculating about liquidity support could still be avidly reading it to determine whether it gives any indication about a bank, or banks, that face difficulties.
	The second part of the amendment tabled by the noble Baroness addresses this concern. The amendment would allow some flexibility in the publication time, requiring the return to be published as soon as is practical, subject to the need to protect the public interest. I have great sympathy with this approach and, again, I appreciate the careful thought that has gone into striking a balance between the need for transparency and the need to retain market confidence. Unfortunately, the amendment still does not quite work. If there is to be a periodic return, which in good times is published as regularly as clockwork, and then—for whatever reason—it is decided to delay publication, a chilling signal would be sent that steps were being taken concerning banks. Whatever the reasons for delaying publication of a particular return, it may well have an adverse effect on the market and it would be very difficult to predict what that effect might be.
	The amendment fails in so far as it does not manage to reconcile in a workable way the competing concerns of transparency on the one hand and the need to maintain market confidence on the other. At the broadest level, however, this debate is about whether to do away with the requirement to publish a periodic return of the nature of the weekly return or whether to keep some form of requirement for a return. The objections to this amendment that I have outlined would apply more generally to a wide range of any similar amendments. By imposing a requirement specific enough to be meaningful, an expectation of publication is raised and, as soon as a return is not published, or is published with significant redaction, market speculation is likely to escalate. Removing the obligation is, the Government believe, the appropriate way in which to give sufficient flexibility.
	I hope that I have reassured noble Lords about the intentions behind this clause. It is an appropriate and proportionate step to enable the Bank of England to take proper control of the reporting process and to avoid a serious failure of market confidence in periods when liquidity assistance has been offered. Given these concerns and the very real difficulties with the amendment, I ask the noble Baroness to reconsider whether her amendment is necessary or desirable.

Viscount Eccles: My Lords, I should like to make a short intervention. I think that the antithesis between transparency and market confidence is out of date. In a reasonably open society with a free media, in the digital age, you cannot maintain the argument that there is a genuine antithesis between transparency and market confidence. I urge the Minister to go back to the Treasury and ask for that matter to be seriously considered.

Baroness Noakes: My Lords, I thank the Minister for his comprehensive reply and my noble friend Lord Eccles for his contribution. The big issue is not as the Minister articulated it; it should be whether the Treasury or the Bank calls the shots. I may well have drafted in HMRC because I had not translated the wording that was in the 1844 Act; I assumed that the successor was the Treasury, but I had not checked that properly. The Minister tried to make the tension between transparency and public interest the issue. It is extraordinary that the Bank has, since 1844, been publishing a weekly return, yet there have been many periods in that time when the Bank has entered into support operations and this issue has never been raised. This issue is being used as a cover for increasing secrecy.
	If I were a Treasury Minister, which I am not, I would not let the Bank get away with it. I would keep Treasury control over what the Bank does. Current Treasury Ministers seem content to let the Bank retreat into its own version of secrecy. We do not think that that is a good idea, partly because of the issue of transparency about where what is in effect public money is going, but also in part because the weekly return gives important information about whether the printing presses have been unleashed. In today's environment, that is important information for all those who want to know what the Bank is up to in supporting the economy.
	I can see that I will not change the Government's set intent. We shall have to see what happens in practice. I beg leave to withdraw the amendment.
	Amendment 104 withdrawn.
	Clause 245 : Variation of permission
	Amendment 105
	 Moved by Baroness Noakes
	105: Clause 245, leave out Clause 245

Baroness Noakes: My Lords, my Whip was yelling in my ear and I was momentarily distracted, so I apologise. I should say that I had intended to talk about this clause in Committee in a clause stand part debate when it was Clause 238, but in the early hours of last Tuesday morning the clause managed to stand part without my addressing it. I have now tabled an amendment in order to probe the issue.
	This clause allows the FSA to vary permissions to carry on regulated activities on its own initiative inter alia where it is desirable to protect consumers. There is nothing wrong with that, but the new wording added by Clause 245 means that the FSA can vary permission in relation to bank A even though the consumer protection is in respect of the customers of bank B. I struggle to see how that might be appropriate, so my purpose for questioning this clause in Committee and again today is to find out what the clause is designed to do in practice. I beg to move.

Lord Davies of Oldham: My Lords, I am not surprised that the noble Baroness has probed this clause, because it is technical in nature. It clarifies an important provision in the Financial Services and Markets Act 2000, specifically Section 45(1)(c). This section gives the FSA the power to vary or cancel on its own initiative a permission that it has granted to allow an authorised person to carry out regulated activities. It allows the FSA to exercise this power in a number of circumstances, such as when the person with permission is failing or is likely to fail to satisfy the threshold conditions or has failed within the last 12 months to carry out the activity to which the permission relates.
	Subsection (1)(c) also allows the FSA to exercise its power where it is desirable to do so in order to protect the interests of consumers or potential consumers. Usually in the FSMA, where there is a reference to consumers, this means consumers generally and not just a particular firm, and this is the appropriate interpretation of Section 45. As recent events have shown, that is entirely appropriate. We need to consider the interests of consumers generally, not just on a firm-by-firm basis. Clause 245 would introduce an amendment to subsection (1)(c) to make it clear beyond any doubt that the reference to consumers includes consumers generally. The amendment makes it clear that, for example, the FSA could exercise its powers in the interests of consumers where firm A is conducting investment activities for firm B and is not adhering to regulatory standards, but where the contractual relationship is between firm B and the consumer. It should be noted that the effect of this amendment would relate to any exercise by the FSA of its powers under Section 45 of the Financial Services and Markets Act.
	In addition to providing important clarity in relation to banks, which are the institutions on which we are focusing in this legislation, the Government believe that the effect of the amendment should be general in application. It applies in relation to any financial institution that operates by way of permission from the FSA. This is appropriate because the point is one of clarity of the general interpretation. An amendment that applied only in relation to banks would suggest two different meanings to the interests of consumers rather than one, which would create further confusion and uncertainty. I hope, therefore, that the noble Baroness will accept that I have described why the clause sets out a sensible provision and should remain in the Bill.

Baroness Noakes: My Lords, I am grateful to the Minister for his explanation and I beg leave to withdraw the amendment.
	Amendment 105 withdrawn.
	Amendment 106 not moved.
	Clause 253: Supplemental
	Amendment 107
	 Moved by Lord Myners
	107: Clause 253, page 128, line 27, at end insert "(in new terms)."
	Amendment 107 agreed.
	Amendment 108
	 Moved by Lord Newby
	108: After Clause 253, insert the following new Clause—
	"Report on investment banking
	The Treasury shall, as soon as practicable after the coming into operation of this Act, produce a report which examines the case for separating investment banking from deposit taking, either entirely or as part of a clearly segmented holding company."

Lord Newby: My Lords, this is a revised version of the amendment that we debated in Committee. It would require the Government to produce, as soon as practicable after the Act comes into force, a report examining the case for separating investment banking from deposit-taking, either entirely or as part of a clearly segmented holding company. When we debated this in Committee, the noble Lord, Lord Eatwell, asked the Minister whether he was familiar with the G30 report which had been produced in the previous week. In reply, the Minister said that he would study it as soon as he had the opportunity. Given that I know he spent the entire weekend reading, I hope that he has indeed had the opportunity. In case he has not—and for those noble Lords who equally might not have waded through this extremely technical document—I should like to draw attention to the relevant conclusion of the report which, in typical bankese, states:
	"Large systemically important banking institutions should be restricted in undertaking proprietary activities that present particularly high risks",
	and serious conflicts of interest. The report is referring to exactly the problem that we have had in this country with the large banks, which have started life as deposit-takers, become investment banks and have ended up running a casino which has broken the bank. The importance of the G30 report is not simply in the content of the report, but in the fact of who chairs the committee. The committee which produced it is chaired by Paul Volcker and he will be one of the key advisers to President Obama on all these matters in the months going forward. Therefore, one could assume that this matter will be actively considered by the Administration, and not just the regulators, in the United States.
	This issue was raised by the noble Lord, Lord Turner, in the Economist's Inaugural City Lecture on 21 January. He said:
	"A crucial issue for regulators is therefore going to continue to be how we regulate the very large and very complex systemically important banks which are too big to fail and which are involved both in narrow banking and in complex treasury and trading activities".
	The precise ways in which we achieve this end will need to be carefully considered. He then said:
	"I am not convinced however that this can or should take the form of any absolute separation between institutions".
	It is absolutely clear that the FSA is going to be considering this along with the range of other issues which it is looking at in terms of how to make banking regulation more effective. The assurance which I seek from the Minister is that this should not be thought of by the Treasury as a technical issue to be left to the FSA. It goes to the heart of whether we are going to have a banking system which is fit for purpose in the future and a banking system which is going to have the confidence of the British public. As both the Treasury and the FSA look at a whole raft of ways in which the regulatory framework is amended in the future, I do hope that the Treasury is going to take this matter extremely seriously and not simply leave it to the FSA to look at.

Lord Northbrook: My Lords, this is an interesting amendment. Bringing up the issue of whether the Glass-Steagall Act should be re-enacted is important. In theory, such a report is a good idea, but I think that the problem with some of these investment banks has really been not necessarily whether the model itself is right but often that their levels of gearing have been far too high. That is what has caused a lot of problems for these investment banks. It is not necessarily a question of whether the investment banking idea itself is wrong. I support the principle of the amendment.

Baroness Noakes: My Lords, the noble Lord, Lord Newby, raises one of the issues that will not go away and has to be examined in the immediate future. My only concern with his amendment is that it examines the case for separating. I would be rather more neutral on that and would wish to examine whether or not there was a case for separating. The noble Lord, Lord Newby, is prejudging the answer in the way that he frames his terms of reference; we would not be so definite in that.

Lord Oakeshott of Seagrove Bay: My Lords, I am sorry the noble Baroness feels that a report examining the case "for" prejudges the issue; surely in examining the case for, one looks at the arguments on both sides. One inevitably has to phrase it in that way to look at the arguments for a change from the status quo.
	I shall briefly support and amplify the case made by my noble friend. Why on earth does our state-controlled bank, RBS, have seven branches in Kazakhstan? Is that a prudent or proper use of taxpayers' money? Barclays Capital, particularly its toxic paper machine that generated so many of these strange pieces of paper, was responsible for devising and rolling out Granite, which did so much to let Mr Applegarth and his cronies borrow many more millions than they should have been able to and drive Northern Rock even deeper into the mire. The investment banking operations of banks such as Barclays can create and accentuate serious systemic risk in our basic banking system.
	Three of the world's five largest banks are based in London: Barclays, RBS and HSBC. The noble Baroness, Lady Noakes, has not mentioned it now but I saw in the Financial Times today a rather clever soundbite from Mr Osborne asking whether we want banks that are "too big to bail". I did not see where that was leading, though; it would be interesting, if this amendment were agreed to or followed up, to see what it meant.
	Britain's banking system is like a car ferry carrying quite a few cars but with three enormous articulated lorries careering around on the upper deck. It is very likely to keel over and stall.

Lord Myners: My Lords, in Committee the noble Lord, Lord Newby, eloquently articulated the arguments both for and against the division of commercial and investment banking functions from one another. This is an important and complex issue that is the subject of much current debate. I welcome the opportunity to discuss these issues once again, but I say up front that this is not an issue on which the Government should be required to produce a report.
	The utility of the universal banking model, compared with separate and distinct institutions conducting investment and retail banking, is being questioned at present, not just by Governments but by markets themselves. Similarly, a range of international institutions and commentators are addressing these very questions. In last Monday's debate my noble friend Lord Eatwell referenced the Group of Thirty report that was published on 15 January. I was not familiar with that report then but I understand it suggests that large, systemically important banking institutions should be restricted in undertaking proprietary activities that present particularly high risks. As the noble Lord, Lord Newby, informed the House last week, the OECD has voiced similar support for the general proposition that banking activity—the taking of deposits and the making of loans—should be separated from other types of more speculative financial activity.
	Others may not share that view. The noble Lord, Lord Turner, said in his speech at the Economist's Inaugural City Lecture on 21 January that he was not convinced that there should be an absolute separation of investment banking from retail or narrow banking. The noble Lord, Lord Newby, will remember bringing up some of the counterarguments himself at our debate last Monday, although I do not mean to suggest that he was putting these forward as his own view but rather to show his acknowledgement of the breadth of the argument. I expressed in Committee some sympathy for the concepts of the narrow bank and the broad bank.
	This is fertile ground for further debate, which will take place not least of all in the report that we are expecting from the noble Lord, Lord Turner, in his reflections on the role and future of the FSA and in particular how it will flex its regulatory requirements to reflect differences in risk. There is now a broad acceptance that the capital required against trading activities was too low and the capital required against conventional narrow banking assets was too high and therefore there was an incentive to broaden the activity of a bank. There are worthy issues here for debate and discussion. Even if we do not mandate the separation of the activities we can acknowledge that they had fundamentally different risk characteristics that should be recognised in regulation and capital requirements. Incidentally, that is one of the features that the governor had in mind when he talked about further instruments when he spoke recently in Nottingham.
	I should like to reassure the House that the Government, together with our international partners, will be considering the merits of this, and many other issues, in attempting—and, I hope, achieving—the restabilisation of faltering global financial systems. I remind noble Lords that, as announced by my right honourable friend the Chancellor of the Exchequer, the noble Lord, Lord Turner, is carrying out a review on his recommendations for reforming the UK and international approaches to regulation. He will be reporting to the Government in March and, I hope, will have the opportunity of reporting to this House at that time.
	His review will cover a range of issues of relevance to the concerns of the noble Lords, Lord Newby and Lord Oakeshott, including UK and international policies relating to: capital adequacy; liquidity; valuation and accounting; rating agencies and the originate and distribute model; market infrastructure in over-the-counter derivatives markets; and remuneration and incentive structures and institutional coverage of prudential regulation: whether recent steps to extend the appropriate accounting and regulatory coverage of near-bank and shadow bank institutions have gone far enough or should go further; and finally, cross-border co-operation and co-ordination, including international regulatory co-operation in non-crisis periods, and the scope for better international co-ordination during individual crises.
	The Chancellor of the Exchequer has given the noble Lord, Lord Turner, a wonderful opportunity to redraw the landscape of regulation and stimulate debate and discussion around many issues, including those touched on by the amendments of the noble Lord, Lord Newby.
	The major firms about which the noble Lord, Lord Newby, is rightly concerned are global, and therefore this issue should be addressed on a global stage. It is appropriate that international bodies such as the OECD and G30 are taking this work forward, engaging with Governments around the world. So the UK Government will, in communication and co-operation with our international partners, as well as through ongoing work by the FSA and the tripartite authorities, carry out their assessments of the pros and cons of this complex issue. Should action in this direction be needed, the next step to be taken would of course be to publish proposals on the matter for consultation and debate with stakeholders in the UK. However, I do not believe that this proposal for a report on the matter needs to be placed in the Bill and therefore I invite the noble Lord to withdraw his amendment.

Lord Newby: My Lords, I am grateful to the Minister for that reply. My concern is not simply that the matter be debated, which it will be, but that the responsibility for deciding on changes within banking regulation should not rest only with the noble Lord, Lord Turner. He is producing reports, but the responsibility for what happens should rest in no small measure with government and Parliament.
	A major problem that we have faced in recent years is that the FSA has not been seen to perform its functions as Parliament intended in the Financial Services and Markets Act 2000. Although we have great faith in the noble Lord, Lord Turner, we also have memories and will want to scrutinise the changes in the banking regime that the noble Lord will recommend. With that caveat, I beg leave to withdraw the amendment.
	Amendment 108 withdrawn.
	Amendment 109
	 Moved by Lord Hoyle
	109: After Clause 253, insert the following new Clause—
	"Banking in post offices
	The Secretary of State shall establish a national bank which shall operate from both directly managed post offices and sub-post offices throughout the United Kingdom."

Lord Hoyle: My Lords, I said when we debated it at a late hour in Committee that I would return to this amendment. Although my noble friend Lord Davies is always eloquent and well informed, he generalised on what the position is now rather than being more radical and going for a national or people's bank. However, I was pleased to see in the press at the weekend, which one must sometimes read to learn what is being thought, that we have the support of my noble friend the Secretary of State for Business, Enterprise and Regulatory Reform. I saw him here a little while ago; I thought he might be coming to hear this debate. However, the press was saying that he was in favour of a people's bank, so I hope that I am pushing at an open door tonight. I shall listen with great interest to what my noble friend has to say when he replies.
	I emphasise again that we are talking about a fully fledged bank that could provide all the financial services. That is a radical step, so I hope that we are going down that route. There is no doubt that many people trust the Post Office who do not trust banks. Indeed, they would not even contemplate going to a bank. This will provide those disadvantaged people with that opportunity. It will also bring banking facilities to rural areas. In many cases, no bank is available to them for miles. It will certainly help the elderly, people with disabilities, mothers with children and, of course, those who do not have a car. It would be a great advantage.
	We are talking about providing 12,000 branches. The benefits will not only be in rural areas, but the deprived urban areas where many of the most disadvantaged people in our community live. These are people who do not have the advantages of others such as full banking facilities, going online, paying by direct debit or settling bills in one way or another. It is estimated that the poorest in our society are roughly £1,400 per year worse off because they do not have such facilities.
	On deprived city areas, I do not think that my noble friend referred to the Post Office card account, which should be modified. It is currently only about withdrawing money that the Government have deposited. We want to see it extended to give its customers a fundamental basic bank account. That would certainly help them. The other people it would help are the small and medium-sized businesses that use the post office. Such businesses would derive even more benefit if a people's bank was established. We all know that the Government are talking about getting banks lending again. This would certainly be a positive step in that direction. It would get things on the move in that regard.
	I do not think that I need discuss again what form this bank should take except to say that we might consider the merger of the Britannia and the Co-op, which deals in ethical banking. However, there are positive signs in the press in this regard. I look forward to my noble friend's reply. I beg to move.

Lord Wedderburn of Charlton: My Lords, as usual my noble friend makes a powerful case for something that would bring benefits to ordinary consumers and small businesses. It would further the purposes of government in producing new entities which would lend in situations where ordinary banks, if I may call them that, would have more difficulty in doing so.
	In a debate on a recent amendment, the noble Lord, Lord Newby, asked whether we would have a banking system fit for purpose in the future. I can think of nothing more fit for purpose than setting up a national bank to operate through post offices in towns and in the countryside, as my noble friend proposes. I hope that the Government will give that proposal a favourable response, even at this late stage of the Bill.

Lord Oakeshott of Seagrove Bay: My Lords, we support this amendment. The noble Lord, Lord Hoyle, made a powerful case, especially as regards trust, which I shall discuss in a minute, and ensuring that banking services are available, particularly in disadvantaged areas.
	I am sorry that the noble Lord, Lord Mandelson, is no longer in his place. He looked in a few minutes ago. It would have been good to have him listening to this discussion, although we read with great interest the lead story in the Observer on Sunday on this topic, with which he is probably not totally unassociated. Trust is a great problem for our banking system and for the Post Office in particular. The noble Lord, Lord Hoyle, talked about post office depositors who did not have a car. However, if I may put it this way, they are driving, often with their eyes shut, towards a level crossing with no gates, where the red lights are flashing and the alarm bells are ringing about the Bank of Ireland. British savers have already had one serious shock from Icelandic banks where the FSA and the Government failed to warn or act until it was too late. I am afraid that the message from the markets about Ireland is equally chilling.
	The other day, the noble Lord, Lord Myners, was a little out of touch with where gilt markets have been lately. I should explain that long-term 10-year bonds in Germany are yielding 3.26 per cent today. They are yielding 3.7 per cent in the UK and 5.57 per cent in Ireland. That means that the Irish Government are having to pay a 75 per cent higher interest rate than Germany to borrow money, and even 50 per cent more than ourselves.

Lord Myners: My Lords, I thank the noble Lord, Lord Oakeshott, for giving way. What I said—and I chose my words very precisely—was that the ratio of sterling to bund interest rates saw sterling within the favourable band of the medium-term trend. I was not talking about absolute rates, but rather medium-term relativities. I am in contact with what the gilt market does.

Lord Oakeshott of Seagrove Bay: My Lords, the noble Lord is quite right that he went on to say that. What I objected to was the fact that he said that British bond yields were at a 50-year low, which they were a few weeks ago, but not quite now.
	Anyway, the key thing for Ireland is the ratio and the very serious warning message that the markets are sending that Ireland and Greece are yielding far more bonds than any other Eurobond. This is important because, similarly, the credit default swap rates for the Bank of Ireland—the rates to insure it, if you like—suggest that there is a chance of between 30 per cent and 40 per cent that it will default over the next few years. That is almost exactly the figure for Kaupthing and Landsbanki of Iceland a few months before they went down. At the time, I was warning and the Treasury was giving me very complacent answers. I am afraid that we have been here before.
	I ask the noble Lord to take this on board and to take it up with the noble Lord, Lord Mandelson, regarding his plans. The British state-owned Post Office should stand for total trust for savers, like National Savings. In these extraordinary times in the banking world, as the noble Lord, Lord Myners, has pointed out several times tonight, can we really afford to run the risk of the Post Office's deposits being placed with a shaky foreign bank by a shaky foreign Government's guarantee? The Post Office must now find a strong long-term British banking partner—the noble Lord suggested one name, although there are several perfectly reputable strong names in this country—to replace the Bank of Ireland before thousands of savers are either left in the lurch or the British taxpayer is put in the position of having to ride to the rescue of a foreign Government, as in the case of Iceland.

Lord Davies of Oldham: My Lords, I am grateful to noble Lords who have spoken, and I am particularly pleased that my noble friend Lord Hoyle had support in the debate. I know that two noble Lords who would have spoken had trouble getting here, due to the weather, otherwise my noble friend would have found considerable support from our Back Benches. I appreciate the fact that my noble friend Lord Wedderburn committed himself in support of a sustainable Post Office operation. That is exactly what the Government want.
	We have taken a number of actions to support that goal. Over the past few years, we have worked with the major high-street banks to ensure that a wide range of banking facilities is accessible through Post Office branches. The most recent FSA guide indicates that 17 providers' basic bank accounts can be accessed at the Post Office. In addition, current accounts from a number of building societies and banks are accessible at the Post Office. Furthermore, the Post Office has its own brand of banking services. Again, I hear what the noble Lord, Lord Oakeshott, has said; he made that point last week in Committee and he has made it again. I know it is a serious point, which we will of course take on board. However, he will also appreciate that at present the Post Office is able to offer its own-brand banking services, operated via a joint venture with the Bank of Ireland. That has been a considerably successful activity in those terms.
	The noble Lord, Lord Oakeshott, issued a warning which the Government will take seriously, and I assure him that at this stage the Government do not share his profound anxieties about the position regarding the Bank of Ireland, although I take note of the pointers that he indicated. The Post Office continues to deliver a number of government services. For instance, last year the Department for Work and Pensions renewed the contract with the Post Office to deliver benefit payments through an enhanced Post Office card account. My noble friend Lord Hoyle said that that was too limited in its operation. There are ways in which extension could occur and we will certainly look at them.
	I will mention also that, in the Pre-Budget Report last year, we announced that the Post Office would provide the savings gateway account programme to encourage saving for people on benefits. As my noble friend rightly said in his opening speech, the Post Office reaches parts that other banks have difficulty in reaching. It is a people's service for many who otherwise would not conceive of themselves as able to open a bank account. It is all the more meritorious for that. The Post Office also provides a child trust fund, a Christmas club and savings stamps.
	The noble Lord, Lord Oakeshott, correctly observed that my noble friend Lord Mandelson was here with us for a short period this evening. I think that he was aware that this issue was coming up. Of course it is the case that he has deliberately indicated the extent to which he wants to look progressively and positively at opportunities for the Post Office.
	Often, one looks with a shudder on Report stage, when it falls so quickly after Committee, because one has nothing fresh to say about amendments that have remarkable similarity to those in the debates of the preceding week. However, I am blessed this evening, because whereas I might only have been able to reiterate the potentialities of the Post Office that I identified last week when I had to reply in the debate, I am instead able to give much clearer assertions of the Government's intention to enhance the role of the Post Office.
	The noble Lord said that he wanted to see a stronger role for the Post Office, and this is something that we are working on. My noble friend, who always keeps a close eye on parliamentary procedures, will also know that the Select Committee on the department in the other place has been enjoined with the task of looking at the opportunities that the Post Office could develop.
	Those two important developments give a clear earnest of the Government's intent to respond to the motivation behind this amendment. I am very glad that my noble friend raised the issue this evening. It is a very important debate and there will be other opportunities when undoubtedly it will be taken forward. In the mean time, I hope that I have given a sufficiently positive reply for him to withdraw the amendment.

Lord Hoyle: My Lords, I was very interested in the positive reply given by my noble friend. He was endorsing what I read in the Observer that my noble friend Lord Mandelson had said, namely that we are moving towards a people's bank. I am very pleased about that. I am glad to accept that he has shown us a green light and am pleased to withdraw my amendment.
	Amendment 109 withdrawn.
	Amendment 110
	 Moved by Lord Howard of Rising
	110: Before Clause 254, insert the following new Clause—
	"Review of Act
	(1) The Treasury shall appoint an independent person to conduct a review of the operation of this Act no later than 3 years after it comes into effect.
	(2) The review is not to be concerned with the general policy to which the Act gives effect.
	(3) The person conducting the review must seek the views of all persons who appear to him to have relevant knowledge of the workings or effect of the Act.
	(4) On completion of the review, the person conducting it must make a written report to the Treasury—
	(a) setting out the result of the review, and
	(b) making such recommendations (if any) as he considers appropriate.
	(5) The written report must be received by the Treasury no later than 4 years after the Act comes into effect.
	(6) A copy of the report must be—
	(a) laid before each House of Parliament, and
	(b) published in such manner as the Treasury consider appropriate.
	(7) "Independent" means appearing to the Treasury to be independent of the relevant authorities as defined in section 4(3)."

Lord Howard of Rising: My Lords, Amendment 110 repeats the amendment that my noble friend Lady Noakes moved in Committee. The Government have moved some way to improve parts of the Bill. They have strengthened the reporting duties around public ownership provisions, and the powers to make loans in Clause 228. They have accepted a few, although not all, of the Delegated Powers and Regulatory Reform Committee's recommendations about the appropriate level of parliamentary scrutiny.
	In Committee, the Minister admitted that he agreed with the general principle of this amendment, namely the need for proper review of the legislation. He even gave assurances that the Government would ensure that,
	"all elements of the scheme are appropriately covered by a review".—[Official Report, 26/01/09; col. 165.]
	The Minister also recognised that problems might arise, in particular with partial transfers, and made the point that it might be desirable to evaluate the effects of that part of the legislation more frequently than annually. There is nothing to stop there being as many reviews as the Minister would like. It is important that the review of the Act takes place, that it cannot be avoided and that it does not take place behind closed doors.
	Her Majesty's Government have accepted that the provisions of the Bill have the potential to cause legal uncertainty in many areas where certainty is critical for the stability and competitiveness of our financial sector. Meetings to attempt to reduce this uncertainty are ongoing, but with such wide powers given to this Government to change the secondary legislation, it will be impossible to remove the uncertainty entirely. The Bill is intended to preserve the stability and competitiveness of our financial institutions. The amendment would go a long way to reassuring all involved that the Government are serious about taking an objective, non-partisan approach to resolving problems in the banking sector. The non-partisan element is essential, which is why the amendment calls for an independent review, not an internal review. The assessment of the impact of the Bill as a whole is also crucial. In his comments, the Minister made no mention of when a review might be held. If the Government are given too much flexibility in how their commitment to a review is fulfilled, there is a risk that the review may become postponed indefinitely.
	This amendment is not unusual and the Government have frequently accepted the force of these arguments on previous occasions. In the recent Pensions Act 2008, the noble Lord, Lord McKenzie, appreciated that there was a very real chance that private sector provision could be seriously disrupted by the establishment of personal accounts. Therefore, he took the sensible and responsible step of accepting that there should be a duty to review the scheme. I hope that the Minister will come to the same conclusion in respect of this complex and unprecedented piece of legislation. I beg to move.

Lord Davies of Oldham: My Lords, I do not come to the same conclusion as the noble Lord but I certainly follow him in terms of his objectives. If the noble Lord wanted an earnest of the Government's intent, he will see the extent to which we have already provided for important parts of the review process within the legislation. He mentioned the Banking Liaison Panel and he will know that it will have an important role in advising the Treasury in due course as to what changes are needed to legislation under Parts 1 to 3 of the Bill. That is an important dimension, given the fact that the work that is being done on the provisional panel is already appreciated. Within the framework of this legislation we create the permanent role of the Banking Liaison Panel and review is clearly part of its objective. The past terms of remit allow it to give advice about the secondary legislation under Parts 1 to 3 the Bill. We tabled amendments, which we debated yesterday, to expand the role of the Banking Liaison Panel. Thus the panel will be able to keep under review important aspects of the special resolution review which, of course, has been the nub of very significant debate today and it forms a very important part of the Bill.
	I hear what the noble Lord says about the review having to be independent. I do not necessarily wish to undermine the procedures which are already in place for independent scrutiny of the secondary legislation under the special resolution review—the Banking Liaison Panel. In determining the detail of the appropriate review mechanism, we will also need to cater to the fact that much of the information and analysis which will be germane to this issue will be extremely technical and sensitive.
	That will be doubly the case if the review is also to consider any exercise of the special resolution powers in relation to a particular institution during the review period. We will need to consider carefully how best to ensure that the review is conducted by a person with appropriate expertise to assess such material. We will also need appropriate mechanisms to protect confidentiality.
	The issue is not as simple and straightforward as the noble Lord suggests. We are conscious that reviewing crucial parts of the legislation is important and have already written into the Bill specified provisions. I have no doubt that he will continue to press the concept of the general review, but I hope that he will recognise that the Government are intent on ensuring that the legislation is subject to review. If we need in due course to extend the scope of the review, we will take steps to do so. However, I hope that he will recognise that there is not a great deal of difference between us in his search for a more general review and the rather more specific and carefully thought through provisions that already obtain in the Bill, which of course I commend to the House. On that basis, I hope that he will feel that he can withdraw the amendment.

Lord Howard of Rising: My Lords, I thank the Minister for his remarks. He picked on specific areas. A general review of the legislation is also important and something that he may like to think about. The Banking Liaison Panel will have a very important role, but it should be mandatory for its review to take place and to be put into the public arena. It is all very well to say that the Government will consult, but if there is no set schedule for consultation, it may well not happen. I am sure that the Minister does not mean that to be the case, but there is always the risk. Information and analysis may well be technical and sensitive, and there may be an argument that the publication of the results of consultation should be delayed, but that is not an excuse for discussions that have taken place not be made public in future. I hope that the Minister will listen to those comments. In the mean time, I beg leave to withdraw the amendment.
	Amendment 110 withdrawn.
	Clause 254 : "Financial Assistance"
	Amendment 111
	 Moved by Baroness Noakes
	111: Clause 254, page 128, line 39, leave out paragraph (b) and insert—
	"(b) shall not come into effect unless a draft of the order has been laid before, and approved by a resolution of, each House of Parliament."

Baroness Noakes: My Lords, in view of the lateness of the hour on our final day in Committee, I did not move an amendment to what is now Clause 254, but I raised the issue of whether it is appropriate for an order under the clause to be made using the negative procedure. Clause 254 allows the Treasury to define what is and what is not financial assistance. According to subsection (2), an order can,
	"provide that a specified activity or transaction, or class of activity or transaction, is to be or not to be treated as financial assistance".
	That is on top of a very wide definition of financial assistance already in Clause 254(1).
	The importance of this is that what counts as financial assistance is critical in determining whether the FSA can invoke Clause 7 and start the ball rolling in stabilisation powers. It also drives Clause 227 in relation to Consolidated Fund cover, which we discussed earlier. Concentrating on how the FSA might use it, I find it difficult to see why the power is needed, given the wide definition in subsection (1). If it is needed, surely it ought to be considered by Parliament before coming into effect.
	The Treasury's memorandum to the Delegated Powers Committee said that the negative procedure was needed because such orders might have to be made quickly while Parliament was not sitting. I do not think that that bears close examination. Since there is already a wide definition, it must be the case that the Treasury would want to use the power only if it wanted to classify something that the man on the Clapham omnibus would not recognise as plausibly equivalent to financial assistance. The Treasury would be using this power to define as financial assistance something that was not obviously financial assistance and thereby could use the revised, possibly artificial, definition to set the special resolution regime in motion, because the FSA has no option but to ignore whatever is defined by the Treasury as financial assistance when triggering the stabilisation powers under Clause 7.
	The clause places a potentially very damaging power in the hands of the Treasury, which I suggest ought not to be exercised without Parliament's approval. Otherwise, we give the Treasury carte blanche to determine when to pull the plug on a bank and all the carefully crafted hurdles and tests in Clauses 7 to 9 become meaningless, because the Treasury will in effect define how it is all to work out in practice. I believe that if the power is to remain, we should have proper parliamentary oversight and not simply rely on the negative procedure, because I cannot see that it would be proper or necessary for the power to be used in an emergency. I beg to move.

Lord Davies of Oldham: My Lords, the purpose of Clause 254 is to provide the Government with the power to specify assistance that should or should not be included in the definition of financial assistance for the various purposes for which it is used in the Bill. The clause is therefore of considerable significance because it provides what is essentially a reserve power to give clarity and certainty about the definition, if that is required. The power may well need to be exercised at short notice, because there may be an urgent need to make provision on whether something should constitute financial assistance for the purposes of the Bill. For example, should a bank need financial assistance on an urgent basis, it may want to know as quickly as possible how that financial assistance will be treated under this Bill. For example, will the financial assistance be disregarded by the FSA in determining whether the general conditions for the special resolution regime are satisfied under Clause 7?
	If it is appropriate to make provision under Clause 254 on how financial assistance is to be treated under the Bill, it may well be appropriate, for legal and market certainty, to make that provision quickly. The noble Baroness's amendment would make the exercise of the power subject to the draft affirmative procedure rather than the negative procedure. I recognise that of course there ought to be parliamentary scrutiny of important changes to the definition of financial assistance, but I am not at all convinced that the affirmative procedure is either necessary or appropriate. The power may need to be used urgently. Of course, there are limitations on the affirmative procedure in those terms.
	The Delegated Powers and Regulatory Reform Committee did not think that it ought to recommend the affirmative procedure for this power. The committee made no recommendation about procedure, but had it been anxious about it we all know that it would have agreed with the noble Baroness that the affirmative procedure should be used. The fact that the committee does not agree indicates that, as far as that important body is concerned, the Government may well have got this position right.
	I recognise the anxieties of the noble Baroness on this matter, but we do not think that the power is too broad. The clause does not allow the Treasury to alter the basic meaning of the expression "financial assistance", and the power does not allow the Treasury to make something that is obviously not financial assistance into financial assistance. It merely helps in two broad purposes of assisting with definition. As I indicated, because in certain circumstances there may be the necessity for urgency with regard to this, I do not think that the affirmative resolution is the appropriate procedure. I hope that the noble Baroness will think that the Government's defence of the arrangements in Clause 254 is sufficient for her to withdraw her amendment.

Baroness Noakes: My Lords, I thank the Minister for setting that out. The crux of the issue is whether this ever needs to be done at short notice. The Minister is right that the Delegated Powers and Regulatory Reform Committee did not make any recommendation but, towards the end of that very big document that the Treasury submitted to the committee, it was asserted that the power had to be exercised at short notice. Whether the committee had the time to challenge the underlying veracity of that assertion is perhaps open to question, but I have challenged it for the purposes of the amendment, because no additional information was given in the memorandum to the committee to explain why the power was urgent.
	The Minister has said that the purpose of the power is to give banks certainty that they might get something in a form that did not take them within the Clause 7 formulation, which I think I can just about understand. Doubtless, the Minister will understand my concern that this is not to give the banks certainty but to give the Treasury a power. I am grateful for the explanation that the Minister has given. He has not allayed my concerns but, as with so much of this Bill, we shall have to see what happens in practice. I beg leave to withdraw the amendment.

Amendment 111 withdrawn.
	Amendments 112 and 113 not moved.
	Clause 256 : Statutory instruments
	Amendments 114 and 115
	 Moved by Lord Myners
	114: Clause 256, page 129, line 28, leave out "Negative resolution" and insert "Draft affirmative resolution"
	115: Clause 256, page 130, line 36, at end insert—
	
		
			 "190 Bank of England directions: immunity Negative resolution" 
		
	
	Amendments 114 and 115 agreed.
	Amendment 116
	 Moved by Baroness Noakes
	116: Clause 256, page 131, line 15, leave out subsections (4) and (5)

Baroness Noakes: My Lords, we now reach the final substantive amendment that we have to consider today on Report, for which I am sure we will all give thanks. The amendment is also one that I chose not to move at the end of Committee last week, and it raises slightly different issues.
	I propose in the amendment to delete subsections (4) and (5) from Clause 256. I want to probe the rather unusual procedure of having a rather long list of statutory instruments which are to be made for the first time using a procedure for approval after the event. I am aware of the need for speed for at least some of the orders listed in subsection (5) to be up and running as soon as the Bill receives Royal Assent. We have already debated that, in particular in relation to Clauses 47 and 48, which deal with partial transfers, netting and set-off and related transactions. Others are clearly in the same category.
	My problem is that the amendments have the potential to be controversial. I am thinking in particular of the partial transfer order expected to be made under Clause 48. The Minister will be aware that there are still considerable concerns about the carve-outs in that order and whether they will prove to be positively harmful to banking practices. I believe that further drafts of the statutory instrument are still awaited, and there is a further meeting involving lawyers tomorrow.
	We are only 10 days or so away from Royal Assent, and that means that the order could be made in a form that has not been fully consulted on, which does not necessarily command the support of the banks and could, in extremis, damage their businesses. Part of the purpose of tabling these amendments is to obtain from the Minister a view on the path, from now until Royal Assent, for getting in particular this important statutory instrument under Clause 48, so that it is available immediately Royal Assent is given. As he will be aware, any gap where the detailed rules are not set out in the statutory instrument will be regarded as a major problem by the banking community.
	The list of powers in Clause 256 is quite long, and not all of them seem to be in the urgent category. While I can see that some powers have to be implemented very quickly, I am not clear that the Government have good justification for saying that all of these orders need to be made urgently. I am also not aware of whether drafts of all of them are available and being consulted on, which raises the question of whether the appropriate procedure for all of these orders in the first instance is not the one where approval is effectively given in arrear. I beg to move.

Lord Davies of Oldham: My Lords, the noble Baroness has given me the minor task of surveying the Bill and identifying the various instruments that may be necessary, as well as having to give a quick summary of how they will work and how they will bridge the gap between the outgoing legislation and this new Act, and to do all this before midnight.

Baroness Noakes: My Lords, I do not want the Minister to get carried away with this amendment. Subsections (4) and (5) of Clause 256 include a rather limited list. If the Minister reads it, he will see that I am not referring to every power.

Lord Davies of Oldham: My Lords, that is so. But the noble Baroness asked how this fits in in relation to the expiry powers of the 2008 Act, so it is a fairly tall order. But I will summarise the Government's arguments. Parts 1 to 3 are essentially designed to provide a permanent and refined replacement for the temporary powers created last year by the Banking (Special Provisions) Act, which come to an end in the near future. The Government initially used the powers to take Northern Rock into temporary public ownership. All noble Lords in the Chamber will be well aware of the fact that that Act had a sunset clause attached, which will bring its provisions to an end.
	I think that we can all agree on the prudence of keeping the temporary powers in the 2008 Act while the permanent legislation, this Banking Bill, was being prepared. This has been clearly demonstrated by events. Last year, while we were doing all the consultation and preparation work on this Bill, the Government had to act under the provisions of the 2008 Act with regard to Bradford & Bingley, Kaupthing Singer & Friedlander, and Heritable in order to safeguard financial stability and protect depositors and other creditors. The provisions of the Act lapse on 21 February.
	As I am sure that all noble Lords will agree, in the current situation of continuing financial and economic uncertainty across the world it would be extremely unwise to create a situation where the necessary powers lapsed. That is why we have sought, gained and are duly appreciative of a consensus on putting in place this permanent legislation. I place on record, as my noble friend has done on a number of occasions, our gratitude to the opposition parties for being constructive about the necessity of putting in place permanent legislation in such an important area of our national life as the financial systems. We cannot take the risk of a gap between the relevant powers of the special provisions Act and the commencement of the powers in this Bill.
	However, there are elements of the special resolution regime that require secondary legislation to be in place in order for them to be operable and fully effective. Over the past two days and in Committee we have explored the nature of that necessary secondary legislation. The safeguards that relate to the operation of the resolution regime are contained in secondary legislation and it is vital that it is brought into force at the same time as the power in the Bill to carry out a partial transfer. Similarly, the new insolvency regimes created by Parts 2 and 3 simply will not work unless and until regulations and rules related to the new regime created by the Bill are in place. Again, we could do ourselves the credit of having engaged in very substantial scrutiny and discussion about the Bill on those provisions. To ensure that these essential pieces of secondary legislation can if necessary be in place at short notice, these subsections of Clause 249 will allow these instruments to be put in place by the 28-day affirmative procedure instead of the draft affirmative procedure. We had a substantial debate about that earlier today and further discussion awaits us before, and no doubt during, Third Reading. I sought to assure the House earlier today that the 28-day procedure will guarantee that there will be full debate in Parliament, but I do not think we need to tread over ground we covered so extensively earlier this afternoon.
	This House will have the opportunity to debate these instruments in full and, as an additional safeguard, the procedure can only be used the first time these powers are exercised and only if the Treasury is also satisfied that it is necessary to do so. This is a fairly standard method of bringing forward essential secondary legislation.
	The Government therefore feel that their approach strikes the right balance between ensuring that these instruments are subject to full parliamentary debate and ensuring that the special resolution regime is fully operable from the date on which the key provisions of the Banking (Special Provisions) Act cease to have effect, which of course is in the very near future indeed. I also add that the Delegated Powers and Regulatory Reform Committee, which has considered the Bill in full, has not made any comment or recommendation on this approach.
	The noble Baroness will also know that work is ongoing on developing the safeguards and we believe we are very close to reaching agreement with the legal experts. Royal Assent is expected to be at the end of next week. We will then have until 20 February to commence Parts 1 to 3 and make the essential Statutory Instruments. We will use as much of that time as is needed to get the safeguard orders right. Of course that is a tight timetable. We always recognised in this House when the sunset clause was passed, given the nature of the anxieties that obtained then, which have been magnified so manyfold over the year with regard to the financial system, that this Bill would be extensive in its reach and would require extensive parliamentary scrutiny in a fairly compressed period. I place on record the Government's appreciation for the co-operation of the opposition parties on this point. I hope that I can see that co-operation on this final point and that the noble Baroness will think that this is an adequate and proper defence of the broad structure of the Bill with regard to the provision for secondary legislation and that she will feel able to withdraw her last amendment.

Baroness Noakes: My Lords, subsection (5) mentions 15 statutory instruments or potential statutory instruments. How many do the Government intend to introduce under this procedure by 20 February?

Lord Davies of Oldham: My Lords, that work is ongoing and I do not have a figure that I can put in front of the noble Baroness at this stage. However, there will be Third Reading of the Bill in the very near future, and I will certainly ensure that by that point I can answer her question exactly. I do not have a precise answer, and I have said that I do not have one, but I believe the figure to be between five and seven.

Baroness Noakes: My Lords, I thank the Minister for that response. I also thank him for saying that we have been co-operative, which I believe we have tried to be. Indeed, it is in that spirit that I approach these unusual provisions in Clause 256. The Minister said that this was the standard procedure for first orders. Actually, I think that it is the reverse of that procedure, because the procedure for first orders is often more extensive than the procedure for later orders. Almost all orders under social security legislation, for example, are for pensions and benefits. The first orders are the ones that have a special procedure. The later ones often have the negative procedure or a much lower level of procedure, so this procedure is unusual in that orders can be brought in quickly without prior parliamentary scrutiny.
	As I say, we were happy with this to the extent that it was necessary to support the original introduction of the Bill, but I am much less than happy that the vast majority will not be brought in, which indicated that the list was an excessive taking of power by the Treasury. I note, however, that the person who exercises the power to make the order must be satisfied that it is necessary to exercise it without laying a draft for approval. I hope that the Minister will reflect with his colleagues that the exercise of that power should be used very judiciously. In the spirit with which we have allowed the Bill to make progress through your Lordships' House, I beg leave to withdraw the amendment.
	Amendment 116 withdrawn.
	Amendment 117
	 Moved by Lord Davies of Oldham
	117: Clause 256, page 132, line 5, at end insert "(in new terms)"
	Amendment 117 agreed.
	Report received.

House adjourned at 10.17 pm.